The owner of UK sports goods firm JD Sports was today rewarded for its decision to focus more on sportswear after it reported higher profits and sales than a year ago.
John David Group said like-for-like sales at its 290 sports outlets were up 2.1% since the financial year ended on January 28, marking an acceleration on the 0.3% rise over the previous 12 months.
Sportswear, including tops and branded shirts, now represents 92% of sales after the company rescued the Allsports chain from administration in October. The remainder comprises sales at its outlets devoted to fashion.
A review of the Allsports business ended with the brand name being dropped, existing management being made redundant and 80 stores being retained and converted to the JD Sports fascia. Allsports had 270 sites.
JD said stock levels at the end of the financial year were only £1.6m (€2.3m) higher and this is likely to come down as it wraps up a clearance sale of old Allsports products.
The company added: “We remain convinced that the Allsports store portfolio we have retained will generate a profit in the future as a result of the actions we have taken.”
An 18% increase in operating profits to £20.1m (€29.4m) at JD was applauded by analysts who noted the contrast with the 45% fall in profits reported by major rival JJB Sports last month.
However, JD said its results would have been better if losses of £2.5m (€3.6m) from its 46 fashion outlets did not have to be absorbed.
Like-for-like sales at its fashion outlets fell back by 8.5% during the year and are currently running 5.2% lower.
JD has isolated the fashion division, which includes the stores acquired from RD Scott in December 2004, with its own management team and separate stock.
But the company said the spate of retailers going bust was hampering efforts to offload more of its fashion stores, while the retail sector was weighed down with above-average increases in costs such as rents, rates and the minimum wage.
Executive chairman Peter Cowgill said: “The results are below our expectations and the fashion fascias will only provide profit to the business if some of the larger rented and over-rented ex-JD Fashion fascia can be disposed of.”
But he warned that the property market was now more difficult than it was two years ago, particularly in the light of the number of retail failures.
The collapse of Pilot and Eisenegger during the past 12 months had hurt the balance sheet directly as JD was forced to accept back property assigned to the two clothing chains, leading to a one-off charge of £3.2m (€4.7m).
Mr Cowgill said store disposals were on the agenda for at least another year, adding: “The future cost of this process is extremely difficult to estimate.”
An impairment charge was also taken on 25 underperforming stores and nearly all of them have been earmarked for disposal, he added.
At the bottom line, Bury-based JD saw profits rise 1% to £3.65m (€5.3m).