JD Sports remains upbeat despite taking a £700,000 hit from riots

Retailer JD Sports Fashion yesterday revealed that £700,000 of stock was looted in last month’s riots, while one of its stores has yet to reopen after suffering fire damage.

A total of 16 stores in Birmingham, London, Manchester and Nottingham were hit by the disorder, with six in London suffering “very significant thefts”.

Its losses would have been worse if not for the pre-emptive measures it took to stop looters gaining access to its stores, the firm said.

A JD store in Woolwich in London is still closed as fire damage is repaired, but the rest of the branches were reopened by Sunday, 21 August.

Finance director Brian Small said he was optimistic consumers would not be turned off JD Sports and sports brands in general by the violence.

“We’re never complacent about those kind of things and, of course, we think about it,” he said. “I’m sure that all the brands involved are keen to not be associated with that kind of behaviour in any case and really one hopes that it was a flash in the pan and it will be unrepeated.”

Despite the effect of the riots and store closures, the chain said that like-for-like sales excluding VAT increased by 1.6 per cent in the seven weeks to 17 September, underscoring its credentials as one of the top-performing retailers.

However, it also revealed that underlying pre-tax profits declined 17 per cent to £16 million in the half-year to 30 July as its margins were squeezed by the impact of faltering consumer confidence and the increase in VAT.

The group said its performance was “excellent” given the ongoing pressure on profit margins from rising costs.

The chain’s core customers are teenagers and young adults, who are being particularly hard hit by the economic downturn and rising unemployment.

JD Sports has previously warned that it would struggle to pass on cost hikes as its customers see disposable incomes come under pressure.

Profit margins at its fashion division, which includes its 79 Bank and 37 Scotts stores which are mainly located in the north of England and the Midlands, came under pressure amid fierce competition on the high street.

The fashion division’s like-for-like sales increased by 5 per cent in the half-year, but its operating losses increased by £1.4m to £3.4m as a result of the reduced margin and investment in new stores.

Its sports division, which runs 357 JD Sports and Size? outlets, saw a 1 per cent improvement in sales, while its gross margin increased slightly in the period.

Overall like-for-like sales excluding VAT declined 0.9 per cent in the half-year, which marks an improvement on the 2.8 per cent fall in the first 18 weeks of that period. They have returned to positive territory since.

Overall revenues increased 15 per cent to £439.8m in the period.

Executive chairman Peter Cowgill said the group was on track to meet the City’s expectations for the full-year, although he expects trading conditions to remain tough.

Bottom-line pre-tax profits increased 21 per cent to £20.1m after being boosted by exceptional items from a joint venture. The group increased the dividend by 7.9 per cent to 4.1p.

The groups added that it was in discussions with insurers about a claim relating to the riots, noting it did not believe the events would affect its full-year performance.