JD Sports suffered from annual profits dropping almost a third after a £550mn charge but the retailer expects them to surpass the £1bn mark for the first time this year as young shoppers snap up its trainers and hoodies.
Pre-tax profits fell to £440mn for the year to January 28, from £654mn in the previous period, given the non-cash £550mn hit which came after it “cleaned up” previous acquisitions and sold off smaller sports brands.
However, including adjusted items, the UK leisurewear group generated profit before tax of £991mn, up from £947mn the previous year, and ahead of a consensus of analysts’ expectations of £980mn.
Chief executive Régis Schultz said JD Sports was benefiting from a shift to more relaxed leisurewear from formal wear, with revenues up almost 19 per cent to £10bn.
“It’s the development of this specific part of the market between sport and fashion,” Schultz told BBC Radio 4’s Today on Wednesday. “You go in the street and you look at what people are wearing and it’s sneakers.”
“That is driving us,” he said, adding that “we have the best execution that exists in terms of combining footwear and apparel”.
The group, which trades from 3,400 stores in 32 countries and online, said organic sales were up more than 15 per cent in the first 13 weeks of the new financial year.
Schultz replaced longstanding boss Peter Cowgill in the top job in September following Cowgill’s abrupt exit a year ago. He recently said he would spend nearly £3bn to open 1,750 stores over the next five years.
New chair Andy Higginson lamented the significant “governance deficit” under the previous regime, saying JD Sports did not adhere to the expected norms of a FTSE 100 company. Cowgill was both executive chair and chief executive, while its then non-executive directors lacked “Plc experience”, he argued.
He added that the retailer was “in fine health”, with a brand that is loved by consumers, “and with the financial resources to deliver further expansion”.
Shares in JD Sports declined 4.5 per cent in London on Wednesday morning. They have risen 25 per cent this year.
Analysts at Peel Hunt said: “JD Sports continues to be the preferred global partner for the brands and we believe the growth potential is not reflected in the shares.”