Shoe sales and global reach boost JD Sports, despite profits fall

JD Sports Fashion delivered its slightly delayed — unaudited — annual results on Friday and spoke of “strategic progress in a challenging market”.

The words “strategic progress” usually mean a company didn’t make as much money as it would have liked to, and that was the case here. But with it outperforming the wider market, with revenue in the multi-billions and profit in the hundreds of millions, there’s no suggestion that the company is on the ropes.

It saw organic sales growth of 9%, and Premium Sports Fashion organic sales growth of 10.9%, with like-for-like (LFL) sales growth of 3.8%.

Its revenue rose 2.7% to £10.397 billion (after the impact of disposals) on a directly comparable 52-week basis, although the year to early February was actually a 53-week one. For the 53 weeks, revenue was £10.542 billion, up 4.1%.

The gross margin was 48%, down slightly on the prior period, “reflecting elevated market promotional activity during peak trading”.

Profit before tax and adjusting items for the 53-week period was down 7.5% at £917.2 million and for the 52 weeks was £912.4 million, due to “continued investment in people, stores, systems & supply chain”. Statutory pre-tax profit rose 66.7% to £811.2 million.

And it said the Q1 performance in the new financial year was in line with expectations so it’s maintaining its full-year profit before tax and adjusting items guidance of £955 million-£1.035 billion.

Trading in the 13 weeks to 4 May saw LFL sales down 0.7% against a strong comparative of 14.5% in Q1 last year. And organic sales growth was 4.9% against a comparative of 19.7% last time. 

We’re told that “promotional activity in the market remained elevated in Q1 25 across all regions”. 

Regionally, it achieved Q1 LFL sales growth in both Europe and North America with Asia Pacific down 0.1% (against a 22.5% comparative). In the UK, its “continued promotional discipline, particularly in the online channel, and a tough comparative from Q1 last year, led to LFL sales being down 6.4%”. 

View from the top

Looking at last year rather than the recent Q1, CEO Régis Schultz said that “we again outperformed the market. This strong revenue performance was delivered in a challenging market, particularly through our peak trading period.

“We made important strategic progress: putting the JD Brand first through opening new JD stores; strengthening our Complementary Concepts through the proposed acquisitions of Courir and, announced after the period end, Hibbett; simplifying the group by taking full control of ISRG and MIG and divesting non-strategic businesses; building the right governance and organisation for a global group of our size; and investing in our people and infrastructure to deliver our growth strategy.”

Strategic highlights during the year included it opening over 200 new JD stores with plans for another 200+ in FY25. These new stores are “exceeding internal sales expectations by 20% on average and delivering payback of less than our three-year internal target”.

Its new distribution centre in Heerlen in the Netherlands also began operations and this should have a big impact on FY25, as will the new website platform that’s being rolled out from the current year.

The CEO admitted that the backdrop remains “challenging and volatile” but said he’s “confident the global sportswear market, and in particular, the athleisure space within it, has many years of structural growth ahead of it, with favourable trends like casualisation and active lifestyles continuing”.

He cited a Euromonitor forecast that the sportswear market will achieve value growth of 6.6% a year from 2023 to 2028, on average. This would take the total value of the market from $396bn in 2023 to $544bn in 2028. 

And he spoke of being able to outperform the market and “deliver double-digit market shares in all our key markets”.

Global strength

Part of his confidence comes from the fact that the days when JD Sports was totally reliant on the UK are long gone. And in the latest year, all regions grew revenue in the period other than the UK, “which was impacted principally by non-core divestments made over the last two years”. 

UK revenue declined 8.3% to £3.51 billion, but Europe revenue jumped 16.3% to £3.093 billion and North America was up 8.4% to £3.413 billion. Revenue in Asia Pacific increased 7.5% to £524.8 million. 

Meanwhile, a clear justification of its physical store expansion was that its retail stores grew revenue by 8.9% to £7.956 billion with its online channel declining by 7.6% to £2.35 billion, “reflecting the continued shift back to pre-pandemic online participation and our investment in stores”. As a result, stores now represent 76% of its revenue and online is 22%, with some other minor revenue streams making up the rest.

As for category performance last year, footwear continued strongly with revenue growth of 8.2% to £5.92 billion, while apparel revenue, impacted by the milder AW23/24 weather, declined 4.3% to £3.408 billion. Accessories revenue grew by 6.4% to £669.5 million.

“This means we continue to build a good mix of products delivering a ‘head-to-toe’ shopping opportunity with footwear at 56%, apparel at 32% and accessories at 6% of revenue,” Schultz explained.

It ended the period with 3,317 stores worldwide, 73 fewer than at the start of the period, due mainly to the divestment of non-core businesses in the UK, its planned withdrawal from South Korea and the bankruptcy of the SUR business in the Netherlands, where 72 stores closed.