JD Sports cautions over inflation as pre-tax profits slump
JD Sports Fashion has seen its profits tumble by nearly a fifth as bosses cautioned over inflation and supply chain disruption affecting trading over the rest of the year.
The sportswear chain posted an 18% drop in pre-tax profits to £298.3 million for the six months ending 30 July 2022.
JD said the results were at the top end of its expectations, with the reduction on last year’s profits partially driven by supply chain disruption affecting international brands and dragging down stock of its key footwear styles.
Bosses warned that widespread economic uncertainty, inflationary pressures and industrial action leading to further challenges in supply chains could affect its trading in the second half of the year, although the group did not alter its full-year profit outlook.
Despite worsening economic conditions, consumers are “reluctant to give up the things most important to them”, the company said, adding that demand remains resilient.
This is reflected in the company’s revenue which grew to £4.4 billion in the first half of the year, up from £3.9 billion a year ago.
Sales were particularly strong in the summer as a result of more people going on international holidays, although trade slowed in August and early September as shoppers held back on buying clothes for the autumn season while the weather stayed warm, JD said.
Andrew Higginson, Non-Executive Chair of JD Sports, said: "Whilst this has been a period of transition for the Board, it is reassuring that this has not impacted the financial performance of the Group which continues to deliver strong results with a profit before tax and exceptional items in the first half of £383.5 million (2021: £439.5 million). With this year expected to follow a more normalised trading pattern, this result is at the top end of our expectations for the first half demonstrating the ongoing resilience of our global proposition and the strength of our consumer engagement.
"Whilst the overall performance continues to be encouraging and the result for the half year was at the upper end of the Board’s expectations, it must also be recognised that the most material trading periods lie ahead. Given the widespread macro-economic uncertainty, inflationary pressures and the potential for further disruption to the supply chain with industrial action a continuing risk in many markets, it is inevitable that we remain cautious about trading through the remainder of the second half."
JD’s former boss Peter Cowgill resigned in May after the retailer was fined £4.3 million by the UK’s competition watchdog for sharing commercially-sensitive information with Footasylum, the rival it was seeking to buy.
It then incurred a £50 million loss from the sale of Footasylum after being ordered to offload the business by the Competition and Markets Authority. JD Sports revealed on Wednesday it had agreed to pay £5.5 million to Cowgill after he stepped down.
Cowgill will take home £3.5 million over two years as part of an exit agreement preventing him from taking a new job at a competitor company or advising similar brands. He will also receive £2 million for giving his support and insight to the new Chief Executive, Regis Schultz, and Chairman, Andy Higginson, over an agreed three-year consultancy period.