JD Sports Fashion Plc (the ‘Group’), the leading global retailer of sports, fashion and outdoor brands, today announces its full year unaudited results for the 53 weeks ended 3 February 2024. To aid comparison, the FY24 results, associated commentary and percentage changes are presented below on an unaudited 52-week basis unless otherwise stated.
Commenting on the results, Régis Schultz, Chief Executive Officer of JD Sports Fashion Plc, said:
“In the period, we again outperformed the market delivering organic sales growth* of 9% and Premium Sports Fashion organic sales growth* of 11%. 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 over 200 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.
“I would like to take the opportunity to thank our people throughout the business for their hard work in delivering another year of market outperformance.
“We have started the new financial year with Q1 in line with our expectations in a volatile market and we are on track to deliver our profit guidance for the full year. Looking further ahead, we have a strong business model and a clear strategy to deliver long-term growth and value creation for our shareholders.”
Performance summary
| £m | 53w to 3 Feb 2024(unaudited) | 52w to 27 Jan 2024*(unaudited) | 52w to 28 Jan 2023 (restated)1(unaudited) | Change (52v52) |
| Revenue | 10,542.0 | 10,397.2 | 10,125.0 | 2.7% |
| Gross margin | 47.9% | 48.0% | 48.2% | (20)bps |
| Operating profit before adjusting items* | 979.9 | 973.9 | 1,060.3 | (8.1)% |
| Operating margin before adjusting items* | 9.3% | 9.4% | 10.5% | (20)bps |
| Profit before tax and adjusting items* | 917.2 | 912.4 | 991.4 | (8.0)% |
| Adjusted basic earnings per share* (p) | 12.14 | 13.39 | (9.1)% | |
| Net cash before lease liabilities* at period end | 1,032.0 | 1,469.3 | ||
| Statutory measures | (53v52) | |||
| Revenue | 10,542.0 | 10,125.0 | 4.1% | |
| Operating profit | 927.2 | 806.0 | 15.0% | |
| Net financial expense and impairment loss on financial assets | (116.0) | (319.3) | (63.7)% | |
| Profit before tax | 811.2 | 486.7 | 66.7% | |
| Basic earnings per share (p) | 10.45 | 3.65 | ||
| Dividend per share (p) | 0.9 | 0.8 | 12.5% |
1Explanations for restating FY23 numbers can be found in Note 15 of this announcement and Note 39 to the Consolidated Financial Statements
Throughout this release,’*’ indicates the use of Alternative Performance Measures. Please refer to pages 56 to 62 for the further information including reconciliations to statutory measures.
Financial highlights
· Organic sales growth* of 9.0%, Premium Sports Fashion organic sales growth* of 10.9% and like-for-like sales growth* of 3.8%
· Revenue growth* of 2.7% to £10,397.2m, after disposal impact
· Gross margin of 48.0%, down slightly on prior period reflecting elevated market promotional activity during peak trading
· Profit before tax and adjusting items* for the 53-week period of £917.2m down 7.5%, reflecting continued investment in people, stores, systems & supply chain
· Profit before tax, for the 53-week period, of £811.2m, up 66.7% due to a reduction of £398.7m in adjusting items*
· Adjusted basic earnings per share* down 9.1%
· Net cash before lease liabilities* of £1,032.0m, down on prior period due mainly to acquisitions of ISRG & MIG, & increased capital expenditure* of £539.7m, in line with our strategy & delivering strong returns
· Proposed final dividend of 0.6p; total proposed dividend up 12.5% to 0.9p
· Q1 performance in line with expectations and maintaining full year profit before tax and adjusting items guidance of £955m-£1,035m
Strategic highlights
· JD Brand First
o Opened over 200 new JD stores; plan for over 200 new JD stores in FY25
o New stores exceeding internal sales expectations by 20% on average & delivering payback of less than our three-year internal target
· Complementary Concepts
o Simplified the Group through acquiring non-controlling interests of ISRG & MIG, & disposing of majority of non-core businesses
o Announced proposed acquisitions of Courir in Europe &, after the period end, of Hibbett, Inc. in North America
· Beyond Physical Retail
o New distribution centre in Heerlen (Netherlands) began operations
o New website platform rollout from FY25
· People, Partners & Communities
o Investment in people of over £70m, in addition to minimum and living wage increases
o Strengthened the management team; continued to invest in governance & control environment
o Relaunched the JD Foundation
o Maintained strong Carbon Disclosure Project climate change ratings
Presentation of results
The presentation to analysts will take place at 0900 (BST) on 31 May 2024. To register for the live webcast of this presentation, please use the following link: https://brrmedia.news/JD_FY_24
Financial calendar
27 June 2024: AGM
August 2024: Q225 trading update
26 September 2024: H125 results
November 2024: Q325 trading update
January 2025: Q425 trading update
Chief Executive Officer’s Review
In the period, we once again outperformed a challenging and volatile market with organic sales growth* of 9%, broadly in line with our objective to deliver double digit growth, and organic sales growth* in Premium Sports Fashion of 11%, ahead of our objective. Our financial strength was highlighted by the investment in opening over 200 new JD stores in the period, in line with our plans, and the proposed acquisitions of Courir, announced in July 2023, and Hibbett, Inc. (‘Hibbett’), announced after the period end in April 2024.
We achieved good progress in the first year of our five-year strategic plan across the four pillars of JD Brand First, Complementary Concepts, Beyond Physical Retail and People, Partners and Communities. Our drive to deliver this plan is unrelenting, exhibited most recently with the proposed acquisition of Hibbett in the key North American market. Hibbett will be one of our Complementary Concepts in North America, alongside Shoe Palace and DTLR, supporting the nationwide, mall-led growth opportunity in the US for the JD brand, with more regionalised growth in local communities. We are excited by the opportunities Hibbett will bring to our North America business.
We again made significant investments in our people, our governance and our control environment to ensure we have a strong platform for long-term growth: we’ve invested over £70m in our people through levelling up and increasing pay across our workforce, in addition to minimum and living wage increases; we are strengthening our cyber security and improving the quality of our operating systems platform; and we are ensuring we have a more efficient supply chain, reflecting the changing global business mix, both by geography and by sales channel. These investments are the right choices for the business but have weighed on profit progression in the period.
I am confident that 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. Euromonitor1 is forecasting that the sportswear market will achieve value growth of 6.6% per year from 2023 to 2028, on average. This would take the total value of the market from $396bn in 2023 to $544bn in 2028. We believe that through our growing brand presence, our industry-leading buying and merchandising team, our powerful brand partner relationships and both our strong balance sheet and cash generation capability, we will outperform the market and deliver double digit market shares in all our key markets.
Performance
In the 52 weeks to 27 January 2024, we achieved revenue* of £10,397.2m, 2.7% up on the comparative 52-week period, in what ended up being a very challenging market. In constant currency, sales growth* was 2.9%. Revenue growth* was impacted negatively by disposals made during the period. Like-for-like (‘LFL’) sales growth* was 3.8% and there was a 5.2% benefit from new stores, leading to organic sales growth* of 9.0%. This organic sales growth* exceeded estimated market value growth1 of 6.3% in the period, meaning we outperformed the market organically and we increased our share of the global sportswear market by 10 basis points to 3.4%.
Region2 – From a geographical point of view, 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 £3,510.2m. Europe revenue increased 16.3% to £3,093.5m, North America revenue increased 8.4% to £3,413.5m and Asia Pacific revenue increased 7.5% to £524.8m. Growth in our newer markets has resulted in a better business balance geographically with the UK generating 33% of revenue, North America 32%, Europe 29% and Asia Pacific 5%.
Channel2 – Our retail stores grew revenue by 8.9% to £7,956.6m with our online channel declining by 7.6% to £2,350.3m, reflecting the continued shift back to pre-pandemic online participation and our investment in stores. As a result, stores now represent 76% of our revenue and online is 22%, with other, mainly gym memberships, outdoor living equipment and some wholesale revenue, at 2%. With our focus on customer satisfaction, we are increasingly channel agnostic, meaning we don’t mind where a sale is made – bought in store, bought online and delivered to home, or bought online and delivered to store.
Category2 – Footwear continued to perform strongly with revenue growth of 8.2% to £5,920.4m, while apparel revenue, impacted by the milder Autumn/Winter weather, declined 4.3% to £3,408.4m. Accessories revenue grew by 6.4% to £669.5m while other revenue, which includes outdoor living equipment, delivery income and gym memberships, grew 17.3% to £543.7m. 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.
We 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, our planned withdrawal from South Korea and the bankruptcy of the SUR business in the Netherlands, where 72 stores closed.
Gross margin was 48.0%, down slightly on the prior period, with a positive mix benefit from the strong organic sales growth* of the JD brand offsetting broadly the impact from the elevated market promotional environment we experienced mainly in Q4, specifically through the peak trading period in December.
Operating costs before adjusting items* were 5.1% up on the prior period as we accelerated our operating cost investment in people, systems, supply chain and new stores. In addition to the strong growth in minimum and living wages across a number of our markets, we invested £70m in our people, including removing age banding in the UK, and we are seeing the benefits of this investment through more productive teams and lower colleague turnover in our stores. Further, there were costs associated with investments we are making in stores, distribution centres (‘DC’) and systems in anticipation of generating the benefits from higher sales and a more efficient supply chain. As a result of these investments, operating profit before adjusting items* was down 8.1% to £973.9m and the operating margin before adjusting items* was 9.4%, down from 10.5% in the prior period.
Profit before tax and adjusting items* was £912.4m, down 8.0%, and in line with the revised guidance given in January which was on a 53-week basis. This was lower than we anticipated at the half year due to lower revenue in the second half of the period combined with continued cost investment for future growth. Profit before tax for the 53-week period to 3 February 2024 was up 66.7% to £811.2m due to a lower level of adjusting items* compared to the prior period.
Adjusted basic earnings per share* was 12.14p, 9.1% lower than the prior period due to lower profit before tax and adjusting items* and the increase in the adjusted effective tax rate*. Offset partially by an in-year benefit to adjusted basic earnings per share* from the buying out of the non-controlling interests (‘NCI’) in ISRG and MIG.
At the end of the period, we had net cash before lease liabilities* on our balance sheet of £1,032.0m. This reflects a cash outflow in the period of £437.3m, due mainly to mergers and acquisitions expenditure of £611.0m following the acquisitions of the ISRG and MIG NCIs and an increase in cash capital expenditure of £180.4m as we stepped up our store opening programme and continued to invest in strengthening our operational efficiency.
Reflecting the Group’s performance, our continued strong operating cash generation and the Board’s confidence in our long-term growth strategy and prospects, the Board is proposing a final dividend of 0.6p per ordinary share. This maintains the 1/3:2/3 split between the interim and proposed final dividend that was guided to at our half year results. This proposed final dividend takes the proposed total dividend for the period to 0.9p per ordinary share, an increase of 12.5% on the prior period. The proposed final dividend will be paid on 12 July 2024 to all shareholders on the register at 14 June 2024.
1Source: Euromonitor International Limited, Apparel & Footwear 2024 edition, retail value RSP incl sales tax, US$, year on year exchange rate, current terms
2The analysis of sales performance and breakdown by region, channel and category is on a 53-week basis, including the benefit of the 53rd week
Strategy Update
Our vision is to be the leading, global Sports Fashion powerhouse. Our five-year strategic plan, launched at our Capital Markets Day in February 2023, is the roadmap to achieving this vision. The plan has four key strategic pillars: –
1. JD Brand First – increasing the JD store footprint globally
2. Complementary Concepts – strengthening our complementary sports fashion offers
3. Beyond Physical Retail – building a stronger platform for long-term growth
4. People, Partners and Communities – being the best for our people, our partners and our communities
We have made good progress on all key elements of our five-year plan to become the leading, global sports fashion powerhouse retailer. In the period, we opened over 200 new JD stores across 23 countries; our other US fascias performed well and continue to give us reach across the US, the world’s biggest sportswear market; we launched our JD STATUS loyalty programme in the UK; we opened our new DC in Europe; and we moved closer to rolling out our new Group HR Information System (HRIS).
We remain focused on delivering our ‘triple-double’ of double-digit sales growth3, double-digit operating margin3 and double-digit market shares in our key markets over the course of the plan. In respect of our target for double-digit sales growth3, we made a good start in the first year, delivering organic sales growth* of 9.0% in what ended up being a challenging and volatile market. With the positive impact from the proposed acquisitions of Courir and Hibbett to come, we remain confident of achieving this target. On operating margin*, our target is to reach and maintain a double-digit operating margin3 within the course of the plan. The operating margin* was lower this period than in the base period, reflecting the necessary investment in our operating platforms for long-term growth.
3Sales growth is measured using organic sales growth and operating margin is measured using operating margin before adjusting items*. These terms are defined in the Alternative Performance Measures section on pages 56 to 62.
JD Brand First
The JD brand is our priority and we have three growth pillars for our JD Brand First strategy; accelerating the opening of, and conversion to, JD stores in North America; accelerating the opening of, and conversion to, JD stores in Europe; and expanding the JD brand further by entering new markets through either acquisition or franchise. There is significant ‘white space’ for the JD brand to grow in North America, Europe and Asia Pacific. Accordingly, we anticipate the JD store opening programme will contribute around 5%pts of new space each year through the course of the five-year strategic plan.
This financial period saw an acceleration of our JD store opening programme. In total, we added 216 new JD stores in the period, constituting 157 new stores and 59 conversions from other brands, mainly Finish Line in the US, as planned. We opened in 23 countries across all our key markets and launched the brand in three new markets – Croatia, Cyprus and Slovakia – which took the total number of countries with a JD store to 30 around the world. Return on investment for our JD store opening programme remained ahead of expectations with an average payback of less than three years and new JD store uplifts are more than 20% ahead of expectations.
There continues to be good momentum in North America where we converted 57 Finish Line stores to the JD fascia and we opened a further 40 new JD stores across the US and Canada. New locations for the JD brand included the Aventura mall near Miami, the third largest in the US, the American Dream mall in New Jersey, the Fashion Show mall in Las Vegas and at Laval in Montreal, Canada.
In Europe, we opened 84 new JD stores, including the stores we acquired from Conbipel in Italy and the majority of the ex-GAP stores we acquired in and around Paris. We opened our first stores in Croatia, Cyprus and Slovakia, and we also opened new stores in European cities such as Athens, Bucharest and Vienna. After the period end, we opened our new flagship store on the Champs Elysees ahead of the 2024 Paris Olympics, which will help to grow global awareness of the JD brand. During the period, we acquired the NCIs in Iberia via ISRG and Central/Eastern Europe via MIG, which will strengthen our foothold in these geographies and accelerate our European expansion of the JD brand. We have identified between 40 and 50 stores for conversion to JD from within the ISRG and MIG businesses and we expect to complete these conversions over the course of the next 24 months.
In UK/ROI, the main strategic focus continues to be on improving locations or store size in existing cities and towns. During the period, we opened 21 new stores and closed 13, therefore growing our store portfolio by a net eight stores. Highlights included the relocation and upsizing of the Birmingham Bullring store and new stores in Coventry and Bedford. After the period end, we opened our new flagship store at Stratford in London.
In Asia Pacific, we opened 14 new JD stores but closed 13, including 12 due to our strategic withdrawal from South Korea. We opened new stores in cities such as Auckland, Bangkok and Kuala Lumpur and we finalised the acquisition of our NCIs interests in south east Asia, which is helping us accelerate the growth of the JD brand in these markets.
In addition to ‘own store’ growth, in July we signed our first franchise agreement in the Middle East with Gulf Marketing Group (‘GMG’). This agreement has an initial target of 50 franchised JD stores by 2028 across UAE, Saudi Arabia and Egypt. After the period end, the first store was opened in Bahrain. Also, after the period end, we signed our second franchise agreement, this time in South Africa, with The Foschini Group and we are targetting over 40 franchised stores for this region over the next five years.
Importance of Complementary Concepts
Our Complementary Concepts allow us to widen our customer base and sharpen our customer focus. We have four key pillars within this element of our strategy: growing our community brands within North America; acquiring Courir to develop a new, complementary sports fashion offer; optimising the profitability of the ISRG and MIG businesses within Europe; and divesting non-core fascias within the Group. In addition, we leverage our complementary brands at the top of our brand pyramid, such as Size? and Footpatrol, by providing an environment for seeding new product ideas, launching exclusive ranges and introducing new brands to the Group.
The US market is segmented between malls and neighbourhoods. While the JD brand is focused on malls, our neighbourhood community fascias of Shoe Palace and DTLR ensure that the Group also has a strong community proposition as well. During the period, we opened 14 new stores across these fascias in the US, but closed 10 as we improved the overall strength of the store portfolio. In the new financial year, we plan to accelerate the opening programme to around 30 new community stores.
The acquisition of Courir has proved to be a lengthy process and it remains subject to review by the European Commission. Once the process is concluded, Courir will add a new dimension to our brand portfolio with its stronger female product range and customer base. This will not only complement our existing proposition in Europe but also provide learnings to the JD brand and other brands within the Group.
We simplified the Group further through the acquisition of the NCIs in ISRG and MIG in the period. This allowed us to accelerate our store conversion plans in these markets, as well as placing the loss-making SUR business into bankruptcy. We continued to reduce our portfolio of businesses through the disposals of brands such as Focus, GymNation and Hairburst. Following the NCI buyouts, we will improve the profitability of both ISRG and MIG by optimising the organisational structures and more closely integrating these businesses into the Group.
After the period end, we announced the proposed acquisition of Hibbett, Inc. for £899m. Hibbett is located in Birmingham, Alabama, it has 1,169 stores across its Hibbett and City Gear retail fascias, and it has strong relationships with the key brand partners in North America. This acquisition is in line with our strategic priorities and it is an important transaction for our strategic and financial development. Strategically, Hibbett will strengthen our Complementary Concepts division, enhance our North America presence and provide a stronger platform for the future organic growth of the Group in the region. Financially, it accelerates our North America growth plans and will be earnings enhancing from the first full year post-acquisition. Before completion, which we anticipate will be in the second half of 2024, the transaction will need Hibbett stockholder approval and US anti-trust clearance.JD Beyond Physical Retail
Having expanded both our physical and digital channels successfully in recent years, we are now focusing on creating a single omnichannel experience. We are agnostic about which channel a sale is made in. The technology investments we are making, including loyalty, will make our proposition more omnichannel and give us a better single view of the customer. We believe that JD, as a brand, is trusted by consumers and this relationship can be developed further to create a lifestyle ecosystem of relevant products and services.
There are five areas of focus: replatforming our websites; strengthening our cyber security; developing our omnichannel proposition further; developing our loyalty programme; and improving the efficiency and effectiveness of our supply chain.
We are planning to go live in FY25 with our replatformed websites, starting with Italy as our proposed first go-live market. For all companies, cyber-crime is a growing global threat and we continue to invest in our cyber security. We have recruited a Chief Information Security Officer to lead our cyber programme.
Our click and collect trial in France is providing learnings for the future and we had over 100 stores live by the period end. We are now building out a roadmap for future click and collect markets in Europe.
Our JD STATUS loyalty programme in the US now has 5.1m active members and, following a successful trial, we rolled out JD STATUS across the UK during the period. By the period end, we had 800k app downloads in the UK, of which 75-80% were active users. The average transaction value of JD STATUS members in the UK is over 40% higher than non-members. Members of JD STATUS and Nike Connected will soon start to benefit from improved targetting of offers and other benefits as the two programmes improve their connectivity going forward, and we will launch JD STATUS into European markets during the new financial year.
We continued to make progress on our UK/European supply chain optimisation with the Heerlen DC opening manually for selected brand partners and own brand. Going forward, we will automate Heerlen, enabling it to serve as the logistics hub for the Group across Continental Europe.
People, Partners & Communities
We want to provide our colleagues with the best opportunities to develop their individual careers and to support them in achieving their ambitions, to be the best partner for the brands and the best partner for the communities where we operate. Improving ESG performance is an integral part of our Group strategy. As a FTSE 100 Company, we recognise that our scale enables us to make positive, lasting changes.
We are currently focused on: improving our people systems functionality; creating a target organisation for future growth and people development; developing our key partner programmes; and continuing to make a positive contribution to the communities where we operate.
Our people are at the heart of our business. We are investing in a new global HRIS which will ensure a more seamless HR experience for our people. We will start going live with the new system in 2024. We have invested £70m in our people in the period including through the removal of age wage banding in the UK, improved bonus and conditions for UK store managers and salary increases. As well as these investments, there have also been mandatory minimum and living wage increases. This helps to ensure we recruit and retain the best talent. In the UK, following this investment, we have seen a significant reduction in colleague turnover.
We strengthened our global leadership team with the hiring of Dominic Platt as the Group’s new Chief Financial Officer (CFO) and Dominic has made a strong contribution to the Group in his first few months.
Our commitment to our community is showcased through our ongoing partnership with the JD Foundation and various community support programmes across the regions, such as the Shoe Palace ‘Believe to Achieve’ programme. The JD Foundation strategy is evolving to focus on social mobility, building stronger youth communities and transforming young people’s lives through opportunities, engagement and social change. 60% of our employees are under 25 and 87% are under 35.
We are very proud of our ongoing climate achievements which include: achieving an ‘A-‘ ‘Climate Change’ grade, ahead of the UK retail sector average, from the Carbon Disclosure Project (CDP) for the fourth successive year; achieving a ‘B’ grade for CDP Water Security, also ahead of the UK retail sector average; sourcing 95% of cotton for our private label products via the ‘Better Cotton’ initiative; and retaining our ‘Zero Waste to Landfill’ accreditation at our largest UK and European distribution and office locations.
Q125 Trading Update
Trading in the 13 weeks to 4 May 2024 was in line with our expectations. LFL sales* were 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% in Q1 last year. Promotional activity in the market remained elevated in Q125 across all regions. Regionally, we achieved LFL sales growth* in both Europe and North America with Asia Pacific down 0.1% (against a 22.5% comparative). In the UK, our continued promotional discipline, particularly in the online channel, and a tough comparative from Q1 last year, led to LFL sales* being, down 6.4%. The UK therefore held back the JD fascia overall, although LFL sales growth* was achieved in our complementary fascias in North America and in our Sporting Goods fascias.
Organically, reflecting the strength of our JD store rollout programme, both Europe and North America achieved double-digit organic sales growth* with Asia Pacific delivering high single-digit growth.
| Q125 | LFL sales growth* | Organic sales growth* |
| 1UK | (6.4)% | (5.8)% |
| 1Europe | 1.6% | 10.8% |
| North America | 2.0% | 8.2% |
| Asia Pacific | (0.1)% | 10.1% |
| Group | (0.7)% | 4.9% |
1From FY25, we will move to new segmentation, which includes moving the reported sales from the Republic of Ireland from UK/ROI to Europe. This new segmentation is detailed within the CFO statement.
Gross margin was 48.2%, in line with the prior period, reflecting our margin discipline through Q1, and in line with our expectations.
JD Sports Fashion are maintaining our full year profit before tax and adjusting Items* guidance of £955m-1,035m. This includes a c.£55m annual increase, announced at our March update, from the accounting policy change to include amortisation of acquired intangibles as an adjusting item from FY25 onwards.
We will release our Q2 trading update in August 2024.
Régis Schultz
Chief Executive Officer
31 May 2024
