JD Sports Fashion achieves another period of outstanding progress

JD Sports Fashion Plc (LON:JD), the leading retailer of sports, fashion and outdoor brands, has announced its Final Results for the 52 weeks ended 29 January 2022 (2021: 52 weeks ended 30 January 2021).

a)   The prior year has been restated to reflect the 5:1 share split which was approved by shareholders at a General Meeting on 26 November 2021

b)   Further detail setting out the background to the alternative performance measures and a reconciliation to statutory measures is provided after the Interim Chair’s Statement. In addition, throughout this release ‘*’ indicates the first instance of other alternative performance measures which are also explained after the Interim Chair’s Statement and are reconciled to the statutory measures

c)   Net cash consists of cash and cash equivalents less interest-bearing loans and borrowings

Helen Ashton, Interim Chair, said:

“This was another period of outstanding progress with the Group delivering a record headline profit before tax and exceptional items of £947.2 million (2021: £421.3 million), more than double the previous record of £438.8 million set in the period to 1 February 2020, which was the last completed financial year prior to the COVID-19 pandemic. This result demonstrates our capacity for growth in both existing and new markets, and the strength of our global proposition and consumer engagement in store and online. We are, as always, indebted to our talented and committed colleagues across our Group and send our thanks for the amazing work they do every day.

“We are particularly encouraged by the strong performance from the Group’s banners in North America. It is increasingly evident that the Group’s progress in North America, and the United States in particular, is having a long-term positive impact both on the Group’s overall performance and its relationships with the international brands.

“Balancing the operational requirements of running and growing a business through a global pandemic with the obligations of elevating governance standards has been complex and not without challenge. A number of regulatory issues have arisen through this time which, following a series of independent investigations alongside the completion of the Group’s Governance review, have highlighted the need for both greater relevant experience on the Board and more formalisation in governance systems, risk management recording, the documentation and appraisal of internal controls and the mechanisms for reporting relevant matters to the regulatory authorities where appropriate.

“The process to recruit a CEO is ongoing with a number of high calibre candidates at different stages of consideration including some who have only recently made their interest in the role known. A process to recruit a new Non-Executive Chair is also progressing at pace. Meanwhile, the Board is happy with how the interim arrangements are operating and will update the market on the progress of these search processes as appropriate.

“JD is a globally recognised iconic multichannel retailer with a proven strategy, clear momentum and a talented and resilient senior management team who are recognised within the sports fashion industry as some of the leading figures in their fields. The Board and senior management team are united in their determination to build on the historical successes with the same laser focus on the consumer, commercial rigour, attention to service excellence and analytical intensity. We will continue to seek to inspire the emerging generation of aspirationally minded consumers through a connection to the universal culture of sport, music and fashion with the highest standards of consumer experience and execution, both in stores and online. Building on our status as a premier global strategic partner, we will also continue to deliver a product and brand mix which is emotionally engaging, exclusive and continually evolving.

“Whilst we are encouraged by the resilient nature of the consumer demand in the current year 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, the Board believes that the headline profit before tax and exceptional items for the year end 28 January 2023 will be in line with the record performance for the year ended 29 January 2022.”

Financial Results Summary

·      Record result for the year with profit before tax and exceptional items of £947.2 million, more than double the previous record set in the year to 1 February 2020 (2021: £421.3 million; 2020: £438.8 million) demonstrates management’s capabilities in relation to managing both supply chain disruption and frequent consumer channel shift through the COVID-19 pandemic. This result includes £125.6 million of profit from the combination of acquisitions in the year and the annualisation period of businesses bought in the 52 weeks to 30 January 2021.

·      Strong performances from the Sports Fashion retail fascias in the UK and Republic of Ireland and North America in particular:

o   UK and Republic of Ireland: Profit before tax and exceptional items increased to £471.2 million (2021: £262.7 million; 2020: £288.5 million) with a strong retention of sales through digital channels in the first quarter whilst the stores were temporarily closed combined with strong demand after reopening

o   North America: Profit before tax and exceptional items increased to £343.0 million (2021: £171.9 million; 2020: £94.2 million) which includes contributions of £57.3 million (2021: £13.9 million in the six-week period after acquisition) from Shoe Palace and £50.6 million from DTLR (46-week period post acquisition). All of the Group’s businesses successfully capitalised on the favourable trading conditions provided by a second round of fiscal stimulus from the US Federal Government

·      Outdoor returned to profitability with an elevated demand for holidays in the UK and a general recognition of the physical and mental health benefits of spending time outdoors with a profit before tax and exceptional items of £25.9 million (2021: loss of £6.1 million)

·      Net cash balance at the end of the period, being the peak of the cash cycle, of £1,185.9 million (2021: £795.4 million) reflects both the very strong cash generation in the UK and North America and the net proceeds, after costs, of £455.9 million from the placing of 58,393,989 new ordinary shares during the year

·      An enhanced final dividend of 0.35p (2021: 0.29p – restated) per share is proposed which recognises the performance of the Group over the full year

Strategic and Operational Summary

·      Search for Global CEO progressing with process for Non-Executive Chair also ongoing. Board and senior management aligned in a desire to build on the recent success and global momentum against our proven strategy

·      Review of regulatory compliance issues, Group’s Corporate Governance operating model and assessment of current compliance with the UK Corporate Governance Code completed with Board fully committed to making the necessary changes highlighted through these reviews 

·      Significant acquisitions in the period have further extended the Group’s geographical reach:

o   DTLR enhances the Group’s exposure to key consumer demographics in the highly important East Coast market in the United States

o   Marketing Investment Group in Poland gives the Group a presence in Central and Eastern Europe for the first time

o   Cosmos in Greece and Cyprus gives the Group its first presence in the east of the Mediterranean which has been complemented in the current financial year by the commencement of a joint venture in Israel

·      International development of JD in other markets continues to gain momentum:

o   87 stores trading as JD in the United States at the end of the period with a further nine stores converted in the first four months of the new financial year

o   32 net new JD stores opened across Europe including first stores in Eastern Europe in Poland and Romania

o   10 net new JD stores in the Asia Pacific region

o   First JD stores in Indonesia and Israel opened in the current financial year

·      A major programme of work is being progressed to enhance the logistics network and fulfilment capabilities across the UK and Western Europe:

o   Derby (UK): Construction works on the new 515,000 sqft facility in Derby which will be used exclusively to fulfil online orders for JD in the UK are now complete, with initial fit out of the site ongoing. Limited fulfilment from the site is due to commence ahead of the peak period later this year with the site expected to be fully operational by mid-2023

o   Heerlen (the Netherlands): Construction of the 620,000 sqft facility in Heerlen, South-East Netherlands which will fulfil product for both stores and online orders in Western Europe is underway. Initial fulfilment from this site is scheduled to commence in the second half of 2023 with the site expected to be fully operational by mid-2024

o   Dublin (Republic of Ireland): 65,000 sqft warehouse near Dublin now fully operational, supplying both product to stores and fulfilling online orders in the Republic of Ireland

·      JD Sports Fashion has repaid, in full, the support which its UK businesses received during the current year from the Coronavirus Job Retention Scheme totaling £24.4 million