By Mark McSherry
Bury-based FTSE 100 retailer JD Sports Fashion plc said on Wednesday it expects that its headline profit before tax and adjusted items for the 53 week period ending February 3, 2024, will exceed £1 billion for the first time.
The prediction came as JD Sports reported results for the year ended January 28, 2023, showing that revenue increased to £10.125 billion from £8.563 billion and profit before tax and adjusted items rose 5% to £991.4 million.
Reported profit before tax fell to £440.9 million from £654.7 million — with JD Sports explaining that this number “includes a total charge for adjusted item of £550.5 million (2022: £292.5 million) which principally relates to a non-cash movement in the present value of future put and call options held with minority shareholders in certain subsidiary businesses and losses incurred in divesting our non-core branded fashion businesses.”
JD Sports shares are up 27% year to date, but fell 3% on Wednesday.
In its outlook, JD Sports Fashion said: “The group is reassured with trading to date in the new financial period with growth in organic sales at constant exchange rates of more than 15% after 13 weeks.
“This performance is further evidence that consumers worldwide are more attracted than ever to JD’s differentiated proposition with its attention-grabbing in-store experience, breadth in the range of brands and availability of key styles.
“Whilst we are encouraged by the resilient nature of the consumer demand in the current period to date, we remain conscious of the headwinds that prevail at this time including the general global macro-economic and geopolitical situation.
“Against this backdrop, assuming current exchange rates, we expect that the group’s headline profit before tax and adjusted items for the 53 week period ending 3 February 2024 will be in line with the current average consensus expectations of £1.03 billion.”
JD Sports chair Andrew Higginson said: “The progress that the group is making in its global markets is reflected by the fact that organic sales at constant exchange rates were 12% ahead of the prior period with a significant strengthening in trade through the second half of the period, particularly in North America, as the supply of product from a number of the international brands normalised.
“We are pleased with the positive progress that we are making in North America and it is our intention to accelerate the rollout of JD in this important market as we believe it will deliver long term sustainable benefits.
“JD continues to be the partner of choice for many international brands who see our premium fascias as the natural global home for their latest ranges and freshest new styles.
“The announcement in September 2022 that JD was Nike’s first European retail partner for its connected partnership, designed to enhance the shopping experience of customers through access to an additional range of Nike member-exclusive products and experiences, is proof that our relationship with these brands and our access to product is stronger than ever.
“The group is reassured with trading to date in the new financial period with growth in organic sales at constant exchange rates of more than 15% after 13 weeks.
“This performance is further evidence that consumers worldwide are more attracted than ever to JD’s differentiated proposition with its attention-grabbing in-store experience, breadth in the range of brands and availability of key styles.
“Whilst we are encouraged by the resilient nature of the consumer demand in the current period to date, we remain conscious of the headwinds that prevail at this time including the general global macro-economic and geopolitical situation.
“Against this backdrop, assuming current exchange rates, we expect that the group’s headline profit before tax and adjusted items for the 53 week period ending 3 February 2024 will be in line with the current average consensus expectations of £1.03 billion.”
REACTION:
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “JD Sports has raced ahead as the demand for the latest shoes and athleisure-wear shows little sign of abating. It’s expecting profit to exceed £1 billion for the first time this year.
“Brand power is showing little sign of losing its prowess on the retail track with a pair of the new must-have trainers still proving a huge draw, despite pressures on budgets.
“As JD Sports has hurdled the cost-of-living crisis, pre-tax profit for the year to January came in at £991.4 million, ahead of guidance. It’s now ramping up new store openings, taking advantage of the renewed enthusiasm to browse in bricks and mortar shops once more.”
Victoria Scholar, Head of Investment, Interactive Investor: “JD Sports reported full-year profit before tax of £440.9 million down from £654.7 million in 2022, weighing on its share price today.
“Revenue grew to £10.12 billion versus £8.56 billion in 2022 and it expects group headline profit before tax and adjusted items for this year to meet consensus expectations of £1.03 billion.
“CEO Regis Schultz said he expects further small price increases this year with selling prices up between 5-10% versus last year.
“JD Sports has been carrying out some significant changes such as the appointment of a new CFO Dominic Platt and the acquisition of trainers retailer Courir to accelerate its growth strategy.
“It has ambitious growth plans including plans to spend £500-600 million on store expansion per year. It is also targeting double-digit revenue growth and operating margins.
“In the face of the cost-of-living crisis and cost inflation pressures, JD Sports, which describes itself as the ‘King of Trainers’ is defying the doom-and-gloom, on track to see earnings top £1 billion for the first time this year as its collection of sports fashion clothing and shoes including brands like Nike, adidas and Puma, continues to chime with consumers.
“Shares in JD Sports have performed very well so far in 2023, rallying over 27%, sharply outperforming the FTSE 100. However shares are under pressure today after earnings fell versus last year.”