UK retailer JD Sports upgraded its full-year profit expectations after “robust” recent demand but criticised the government for “pomp and spin” over non-tariff barriers to trade with Europe.
The Lancashire-based athleisurewear group said it expected underlying pre-tax profit of “at least £400m” for the financial year to January 30, sharply higher than current market expectations of £295m.
Same-store sales in the 22 weeks to January 2 rose 5 per cent compared with a year earlier. “When we reopened stores in June and again in December there was a resurgence [of sales] in stores,” said executive chairman Peter Cowgill. “But the stickiness of online held up too.”
Richard Chamberlain, an analyst at RBC, said online sales accounted for about a fifth of the total before the pandemic but were likely to be “at least 30 per cent” after it.
Mr Cowgill said the current year “has been very difficult to read” but that the company had done “much better than we expected”.
JD Sports reported pre-tax profit of £446m last year and analysts had originally forecast £476m for the current year.
Those estimates were slashed to as little as £167m as the coronavirus pandemic swept across Europe, but partially recovered after JD raised its own guidance in September.
JD’s shares were up almost 5 per cent in mid-morning trade on Monday, and have more than recovered losses sustained in the sell-off triggered by the UK’s first lockdown last year.
Mr Chamberlain said that while JD’s young customers were likely to face “some employment and income pressure”, they were also “more fearless than older shoppers in a Covid-19 environment”.
However, the company warned that profits in the year to January 2022 would be “5 per cent to 10 per cent ahead of the current year”. The implied £420m-£440m range is below the current market consensus of £477m calculated by Capital IQ.
“We know we are going to lose February and you’ve got to ask what the confidence level is about reopening in March,” said Mr Cowgill, referring to the current lockdown in the UK, which is still JD’s biggest single market.
He also criticised the recent UK/EU trade deal, saying it would result in a “diversion of employment” away from the UK as JD is forced to establish distribution infrastructure in Europe to avoid additional tariffs.
“Free trade is proving a bit of misnomer. I’m not sure how up to speed they were on all this — I’d love to ask them,” he said, referring to rules of origin that could result in duties being imposed on goods imported into the UK and then re-exported to EU markets.
“We’ve got to look at shipments [from Asia] direct to Europe,” he said. “We would have had to do something like this eventually to improve delivery times for ecommerce orders, but not on the scale we are now going to have to”.
JD Sports made £1.6bn of sales in Europe last year, almost all supplied from its main warehouse complex in Rochdale. It will now establish a facility in Europe, at a cost running into tens of millions of pounds, to supply stores and online customers there.
“I’m not sure [the government] even recognised country of origin rules as an issue. Everything is clouded by pomp and spin,” Mr Cowgill added.
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