JD SPORTS Fashion has warned it will pull down the shutters on more Blacks Leisure stores after the chain it rescued from administration contributed to a slide in profits.
The group, which bought the Blacks business for £20 million in January, has already closed 93 of the weakest performing stores but a further 50 are under threat as it looks for a long-term estate of 150 sites.
JD will also ditch the Millets name under plans to use Blacks, which sells own-brands such as Peter Storm and Eurohike, as its single outdoor fascia.
As expected, Blacks racked up a £10m loss in the six months to 28 July, helping to slash JD’s profits to £2.9m from £20.1m a year ago.
However, with the business now stabilised, the group hopes that Blacks – whose roots can be traced back to a 19th century sail-making business on the Clyde – will break-even in the second half.
JD, which also operates sports stores in France and Spain, said it had inherited a business with a severe lack of stock in many core lines as well as an excessively large and over-rented store portfolio.
While the company sees a profitable future for the business, it warned that margins in the second half will come under pressure as a result of the need to clear camping products following the wet summer.
The fall in profits at JD, which last month sold rugby brand Canterbury to Pentland for £22.7m, was also driven by the cost of transferring to a new centralised warehouse at Rochdale, which is now fully operational.
JD’s core sports fascias of JD and Size grew UK and Ireland like-for-like sales by 1.2 per cent in a “robust” half-year performance, although operating profits for the division were £1.3m lower at £18.9m.
The 350 sports stores recorded growth of 3.2 per cent in the first six weeks of the second half but fashion brands, which include Bank and Scotts, saw a 6 per cent fall in underlying sales over the same period.
Executive chairman Peter Cowgill said: “As ever, the group result for the full year remains very dependent on the sales and margin performance in December and January. Notwithstanding the economic pressure on margin and the general increase in taxation and other levies, the board believes the group is well positioned to deliver results that are within the range of current expectations.”
The FTSE-250 listed group will pay investors an interim dividend of 4.3p per share, a rise of 4.9 per cent on a year earlier.
Investec analyst David Jeary said the firm’s gross margins were much more resilient than he expected although there was much work to do to turn around the Blacks business.
JD said it would run the majority of the 198 stores in the Blacks division until Christmas but the long-term structure of the estate will depend on the stores’ performance relative to newly negotiated rents.
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