Shares surge in JD Sports as it defies UK retail gloom

Millennials’ fondness for athleisure wear helped retailer JD Sports Fashion defy Britain’s retail gloom and beat full-year earnings expectations.

The group’s expansion over the past year, with the purchase of US-based Finish Line and smaller rival Footasylum, also bolstered annual profits. Shares in the firm rose more than 7.5% to a record high.

Executive chairman Peter Cowgill said Britain’s biggest sportswear retailer had targeted millennials and Generation Z consumers -- those born between the mid-1990s and the mid-2000s -- who had driven the trend for athleisure, whereby gym clothes have become acceptable at work, school and on social occasions.

The company said headline pretax profit rose 15.5% to £355.2m (€410.7m) for its financial year. Britain’s retail industry has been hit by weakening consumer spending amid uncertainty over Brexit, higher business costs and a shift to online shopping.

JD, with more than 2,400 stores that sell brands including Nike, Puma and Adidas, has weathered the storm thanks to its international footprint and a strong online presence.

That contrasts with rival Sports Direct, majority owned by billionaire Mike Ashley, who has recently failed in takeover attempts including for Debenhams and Findel.

Shares in Zalando also jumped after Europe’s biggest online-only fashion retailer said it expected to post an operating profit for the first quarter, when it usually makes a loss due to selling off remaining stock after Christmas at a discount.

The shares were up almost 11%, buoying other fashion firms like Asos, Zara-owner Inditex, Adidas and H&M.

The industry has been plagued in recent years by fierce competition and heavy discounting, while investment in logistics and technology to speed online delivery has also weighed on profitability, especially as Amazon expands in fashion.

Zalando said it expected adjusted earnings before interest and taxes in the single-digit millions, while analysts had predicted an operating loss. It said sales growth should meet market expectations for about 23%.

Zalando said the results were in line with its full-year targets. It is due to report first-quarter results on May 2.

Last week, shares in British rival Asos jumped after it stuck to its full-year guidance even after it reported a drop in first-half pretax profit. Shares in both Asos and Zalando tumbled last year after they were forced to issue profit warnings, with Asos blaming a high level of discounting and Zalando saying sales had been hit by the unusually long, hot summer in Europe.

Reuters

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