2nd Oct 2024 09:03
(Alliance News) - JD Sports Fashion PLC on Wednesday reported half-year adjusted profit ahead of expectations, and held guidance, as demand for trainers continued to drive sales.
The Bury, England-based sportswear retailer said adjusted pretax profit rose 2.0% to GBP405.6 million in the 26 weeks to August 3 from GBP397.6 million. This was ahead of a company compiled consensus of GBP395 million.
JD Sports said its adjusting items, which are what it deems to be one-off costs, include spending related to its acquisition of US rival sportswear brand Hibbett earlier this year, costs related to the closure of a distribution centre in Derby and an updated Genesis put and call option valuation.
Including these, statutory pretax profit plunged 64% to GBP126.3 million from GBP353.7 million.
Revenue increased by 5.2% to GBP5.03 billion from GBP4.78 billion.
JD said it outperformed a "challenging and volatile" market with organic sales growth of 6.4% and like-for-like growth of 0.7%.
Nonetheless, shares in JD Sports were down 3.3% to 144.50 pence each in London on Wednesday morning.
The share price reaction reflected disappointing news from JD's key customer Nike late Tuesday. The US sports retailer withdrew its full-year financial outlook and guided second quarter earnings lower than consensus expectations. Nike lost 5.9% in after-hours trading in New York on Tuesday and was down 5.2% in pre-market activity on Wednesday.
At JD Sports, revenue growth was hurt by 2.8% due to prior period revenue from disposals and 1.5% from currency. There was also a 1.9% benefit from the timing impact of the previous 53-week year.
Geographically, the two fastest growing regions for JD Sports, Europe and North America, delivered double-digit organic sales growth just over 10% with the rollout of the JD fascia leading the growth in both regions.
In the UK, trading improved sequentially through the first half, but performance was held back by non-core disposals made during the prior period.
Footwear continued to trade better than apparel, the firm said, although both categories grew.
Footwear sales were driven by the continued growth in 'sneakers' around the world. Growth in the period was 9.6% and footwear's share of revenue increased 2.4 percentage points to 59.8%. Clothing was again held back by challenging weather conditions, particularly in the UK and Europe, where the spring/summer season was wetter than average.
This had a knock-on effect on margin as the industry sold more stock at discounted prices in the summer sales season ahead of the back-to-school period and then into the autumn/winter season.
Apparel revenue was up 0.7% with its share of revenue falling 1.4 percentage points to 29.8%.
Gross margin of 48.2%, or 48.3% excluding Hibbett, was down 10 basis points on the prior period, driven by lower second quarter margins from elevated promotional activity across apparel and online.
Basic earnings per share plunged 90% to 0.42 pence from 4.23p. Adjusted EPS increased 4.5% to 5.15p from 4.93p.
Looking ahead, JD Sports its overall guidance range of GBP955 million to GBP1.04 billion for adjusted pretax profit in financial 2025 remains unchanged. This would be up from GBP912.4 million in financial 2024. The company expects a forex hit from the strong pound of GBP20 million to pretax profit before adjusting items in the second half, after a GBP6 million impact in the first.
Hibbett is expected to contribute around GBP25 million in the full year, reflecting the business contribution from completion, acquisition accounting adjustments and a GBP25 million interest cost from the new acquisition facility.
JD Sports hiked its interim dividend by 10% to 0.33p per share from 0.30p.
By Jeremy Cutler, Alliance News reporter
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