While the outdoor division recorded like-for-like sales growth during the 18 weeks to 8 June, this was achieved at a “significant margin sacrifice”. The development of profitability remains a “work in progress”.
JD expects the chains to benefit from the on-going streamlining of head office functions, as well as the increasing influence of new management.
Lee Bagnall, former chief operating officer of Go Outdoors, has been put in charge of turning around the Millets chain following a shake-up of Blacks’ management team late last year.
“We expect the outdoor fascias to make a substantial but significantly reduced loss in the current year with the biggest improvement coming in the second half,” JD said.
The outdoor division made a loss of £14.9m during the year to 28 February, pulling down profits for the group as a whole by more than 18 per cent.
JD has closed more than 120 stores as part of plans to cut the estate down to about 80 Blacks and 60 Millets outlets.
The news weighed slightly on JD’s shares even though the group said its overall performance remained in line with expectations.
Trading in its core UK and Irish sports shops remains “robust”, with like-for-like sales up 7 per cent. The figures now include Irish sports chain Champion, which JD acquired in the spring of 2011.
However, its fashion brands – Bank and Scotts – suffered a 5 per cent decline in like-for-like sales during the period.
They will report increased losses when JD posts its first-half results in September, though the situation is expected to improve thereafter. Bank, the source of the greatest declines, has brought in former Asos head buyer Debbi Ball to oversee its women’s wear offering.
Despite the difficulties in the fashion and outdoor divisions, Investec’s Bethany Hocking remained impressed by progress in the main sports business. In a note to investors yesterday, she ranked the shares as a “buy”.
“The core business is performing well and the sector discount remains significant,” she added.
Following last year’s demise of JJB Sports, JD is one of the few significant rivals to the UK’s largest sporting goods retailer, Sports Direct.
The latter’s decision earlier this year to buy fashion retailer Republic out of administration is widely viewed as an attempt to cut in on the higher end of the market that JD caters to.
Overall pre-tax profits at JD fell to £55.1m last year as outdoor losses drag down an otherwise strong performance, with both group revenues and like-for-like sales increasing.
Sanjay Vidyarthi, an analyst at Espirito Santo, added: “Our sense is that there remains an opportunity to continue to drive both sales and margin, despite the Olympics and Euro 2012 comparisons. It is difficult to make a direct comparison with Sports Direct.”