JD Sports, the retail giant, has released its financial results for the first half of the year, revealing that the industry is still far from recovering from the effects of the Covid-19 lockdown. Although the company is generally pleased with its performance since reopening stores, it recognizes that retail footfall remains weak due to ongoing challenges posed by the pandemic. It also noted that anti-Covid measures in many countries have led to temporary store closures.

Despite these challenges, JD Sports remains confident in its strengths, including consumer engagement, key brand relationships, and globally consistent multichannel retail standards. The company has reinstated its full-year guidance and expects to achieve a headline profit before tax of at least £265 million for the year.

In the first half of the year, JD Sports experienced a 6.5% decline in revenue, falling from £2.721 billion to £2.544 billion. The Sports Fashion unit saw a 4.6% decrease to £2.402 billion, while Outdoor decreased by 30.2% to £142.5 million. Gross profit decreased from 46.9% to 45.6%, and EBITDA dropped to £337 million from £402.9 million in the previous year. Pre-tax/pre-exceptionals profit fell to £61.9 million from £158.6 million, and reported pre-tax profit was £41.5 million compared to £129.9 million in the prior year.

JD Sports attributed the decline in profitability to the additional costs associated with shifting revenues to online channels during temporary store closures. However, the company was able to retain a significant number of sales, indicating consumers’ loyalty to the JD brand. Its omnichannel strength ensured a consistent shopping experience for customers, regardless of whether they chose to shop online or in-store.

The US market was a highlight for JD Sports, with strong performance through its brands Finish Line and JD. This success was driven by increased consumer demand after the expiration of the US Government fiscal stimulus in July. Additionally, JD Sports’ small test warehouse in Belgium is now operational and providing valuable insights to shape the company’s long-term supply chain strategy for Europe.

Peter Cowgill, the executive chairman of JD Sports, acknowledged the ongoing challenges presented by the Covid-19 pandemic, including outbreaks of the virus, temporary store closures, and the need for strict social distancing in warehouses. However, he expressed confidence in the strength of the JD brand, as evidenced by the retention of over 90% of total revenues during this unique trading period.

Looking back to the pre-pandemic period, JD Sports noted that the early weeks of the first half were positive, with favorable trends continuing from the previous year in many regions. However, the closure of most stores worldwide for several months inevitably had an impact on the company. Despite this, demand remained strong, and JD Sports managed to retain around 60% of combined store and online revenues from the prior year during the closure period. This allowed the company to generate cash, maintain customer relationships, and clear excess stock.

The reopening of stores initially saw an increase in trading due to pent-up demand and promotional activity to clear old stock. However, this boost was short-lived, with footfall in physical retail remaining significantly weaker than historic levels, particularly in Europe. Although footfall weakness was compensated by higher conversion rates and higher average transaction values from customers with intent to purchase.

Overall, total revenues across physical and digital channels were approximately 20% higher than the same period in the prior year in territories where stores had temporarily closed. This growth was primarily driven by exceptional performance in the US, with nearly 50% revenue growth resulting from temporary fiscal stimulus measures. Excluding the US, total revenue growth in other territories during the reopening period was around 10%.

JD Sports’ resilience and performance during these challenging times indicate that the company is well-positioned to succeed as the full impact of the pandemic unfolds.

Useful links:
1. JD Sports Official Website
2. Retail Gazette – News on the Retail Industry