JD Sports Fashion has become the latest high-street chain to demand “fairness and flexibility” in its store leases as weaker retailers use insolvency laws to secure reduced rents.
It said that while it had no plans to cut its own store estate it was “very aware of the financial benefit that other retailers appear to get when they downsize”.
The company’s average lease length is roughly three-and-a-half years, and executive chairman Peter Cowgill said JD had been “enjoying the reductions that Next and others have announced for rents when they come up for review”.
These have typically been roughly 25 per cent, but retailers using company voluntary arrangements have secured cuts of more than 50 per cent in some cases.
Mr Cowgill added that JD Sports had not adopted the practice of asking for rent reductions in between lease events, such as a break or expiry, as Clarks and Primark have done, “but we want to remain competitive and we are fully aware of the rents being paid by companies in CVAs”.
“They give us a reference point when we are going to negotiate. The bottom line is that if they are still in occupation 12 months later then that’s the market rent, or else the landlord would have another tenant in.”
His comments came as the company reported first-half results on Tuesday.
JD Sports, whose UK same-store sales surged 10 per cent in the first half of its financial year to August 3, is one of the few still expanding its physical space in the UK. The like-for-like revenue increase includes online sales, which are rising 25-30 per cent a year but in the UK still account for less than a fifth of overall sales.
Despite strong sales growth in the UK and Europe, it said the adoption of new accounting standards relating to leases would limit the rise in profits over the full year. Without the change, JD said it would have been “on track to deliver headline profit before tax for the full year at the top end of market expectations”.
JD shares were up 6 per cent in morning trade. The company entered the FTSE 100 index this year and its market value, at £6.3bn, is four times that of its biggest UK rival Sports Direct.
Kate Calvert at Investec said the results were strong and upgraded her full-year forecasts, before the impact of accounting changes, by 5 per cent.
Mr Cowgill also defended the remuneration arrangements that led to a shareholder rebellion this year, but said it was consulting major shareholders on future pay structures.
“Historically there’s never really been a share plan. It stems from the initial structures and the way the company developed. There was an LTIP in place for senior managers but not for me.
“It looks more headline-grabbing when an amount like that gets paid in one hit,” he said of the £6m cash bonus, which will be paid to him in instalments over several years. “I’m probably one of the least well-remunerated executives in the FTSE 100.”
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