JD Sports (Financials)
Financial overview
Sales climbed 4.1% to £10.54bn in FY2023
UK sales fell 8.3% to £3.51bn while international sales surged 11.6% to £7.03bn
Online sales slid 7.6% to £2.35bn while store sales jumped 8.9% to £7.96bn
Operating margin rose from 8.0% to 8.8%
Pre-tax profit climbed from 4.8% to 7.7%
JD Sports trades across the UK, Europe, Asia Pacific and the United States.
The sports retailer delivered another year of record sales, climbing 4.1% to £10.54bn on a reported basis for the 53 weeks to 3 February 2024 (FY2023).
JD Sports chief executive Régis Schultz commented “In the period, we once again outperformed a challenging and volatile market with organic sales growth of 9%, broadly in line with our objective to deliver double digit growth, and organic sales growth in Premium Sports Fashion of 11%, ahead of our objective.”
By region, UK revenues fell 8.3% to £3.51bn in FY2023 which JD said was “impacted principally by non-core divestments made over the last two years.”
International revenues jumped 11.6% to £7.03bn with sales surging 16.3% to £3.09bn in Europe, up 8.4% to £3.41bn in North America and up 7.5% to £0.54bn in Asia Pacific. JD said growth in its newer markets resulted in “a better business balance” geographically with the UK generating 33% of revenue, North America 32%, Europe 29% and Asia Pacific 5%.
Within its channels, store sales grew 8.9% to £7.96bn while online sales fell 7.6% to £2.35bn which the retailer said reflected “the continued shift back to pre-pandemic online participation and our investment in stores”.
JD said it is increasingly “channel agnostic, meaning we don’t mind where a sale is made – bought in store, bought online and delivered to home, or bought online and delivered to store.”
Its largest category – footwear - continued to perform “strongly” with sales up 8.2% to £5.92bn in FY2023, while apparel revenue fell 4.3% to £3.41bn, impacted by the milder weather in the second half of the year. Accessories revenue climbed 6.4% to £0.67bn while ‘other revenue’, which includes outdoor living equipment, delivery income and gym memberships, grew 17.3% to £0.54bn.
JD said it continues to build a “good mix of products delivering a ‘head-to-toe’ shopping opportunity with footwear at 56%, apparel at 32% and accessories at 6% of revenue”.
JD had posted a record sales performance in FY2022, with revenues jumping 18.2% to £10.1bn. International sales soared 26.4% to £6.3bn with all regions in double-digit growth. UK sales climbed 6.9% to £3.8bn, driven by “resilient consumer demand.”
In FY2021, it had also produced a set of standout results with sales up 39% to £8.6bn, a new record for the company. Growth across all regions had been strong with the UK and Republic of Ireland recovering after a difficult FY2020, with sales at £3.6bn in FY2021, up 42% year-on-year.
JD saw gross margin fall from 48.2% to 47.9% in the latest financial year, down slightly on the prior period, with “a positive mix benefit from the strong organic sales growth of the JD brand offsetting broadly the impact from the elevated market promotional environment” it experienced in its fourth quarter, specifically through the peak trading period in December.
Group operating costs before adjusting items rose 5.1% on the previous year, as it “accelerated our operating cost investment in people, systems, supply chain and new stores.”
The retailer recorded costs associated with its investment in its stores, distribution centres and systems in “anticipation of generating the benefits from higher sales and a more efficient supply chain”.
As a result of these investments, operating profit before adjusting items fell 8.1% to £973.9m with operating margin before adjusting items falling from 10.5% to 9.4%.
Pre-tax profit margins rose from 4.8% to 7.7% in the latest financial year, delivering pre-tax profit of £811.2m.
JD restated its figures for the year to end 28 January 2023 (FY2022). Pre-tax profit margins had slimmed from 7.7% to 4.8% in FY2022, as profits fell to £486.7m from £654.7m the previous year. The results included a total charge for adjusted items of £550.5m, principally relating to the divestment of several of its sports fashion brands and the closure of its business in South Korea.
Segmental analysis
From FY2024, the retailer will recategorise its segments to the following: JD, Complementary concepts, Sporting Goods and Outdoor and ‘Other’.
The JD segment now comprises its JD, Size, Foot Patrol, Hip and Finish Line banners as well as its JD Gyms and Swim businesses and its non-retail businesses which “develop and incubate brands” - 2Squared and A Number of Names. The Complementary Concepts segment comprises its DTLR and Shoe Palace fascias in the US and businesses which have a differentiated offer and target consumer from JD including Sizeer in Europe. Sporting goods and Outdoor now includes Sprinter in Spain, Sport Zone in Portugal and Cosmos in Greece - “whose proposition is more geared towards sports participation as opposed to lifestyle” - as well as its previous Outdoor segment brands.
JD provided segmental analysis under its new structure on a 52-week comparable basis to 27 January 2024.
The bulk of sales came from its JD segment, climbing 9.0% to £7.41bn and representing 59.7% of group revenue.
Its Complementary concepts segment grew 6.5% while Sporting Goods & Outdoor climbed 2.3%. Its Other segment declined 79.8% to £114.8m
UK sales and like-for-like sales analysis
Sales in the UK/ ROI market faltered in FY2023, falling 8.3% to £3.51bn which JD said was “impacted principally by non-core divestments made over the last two years.”
JD said its main strategic focus in the region continues to be on” improving locations or store size in existing cities and towns”. During the latest financial year, it opened 21 new JD stores and closed 13, growing its UK store portfolio by a net eight stores.
This included the relocation and upsizing of its Birmingham Bullring store and new stores in Coventry and Bedford. After the period end, it opened a new flagship store at Stratford in London.
The UK had delivered a solid performance in FY2022, with sales rising 6.9% to £3.8bn.
Schultz said performance was “underpinned by resilient consumer demand with growth in organic sales at constant exchange rates compared to the prior period of 12% with this revenue growth accelerating through the second half of the period.”
JD previously reported on the UK results using an organic growth measure – which excludes acquisitions and disposals within the period. Within its UK sports fashion segment, its premium retail fascias grew 12% in FY2022, while its other retail fascias grew 5%.
Sales in the UK and ROI had grown substantially in FY2021 to £3.6bn, up 42% year-on-year.
Ecommerce sales performance
Online growth has been driven by the company’s investment into localised payment and delivery options, alongside multichannel developments benefitting the in-store experience. The pandemic accelerated ecommerce growth with customers going online during periods of store closure.
JD saw online sales fall 7.6% to £2.35bn in FY2023 which the retailer said reflected “the continued shift back to pre-pandemic online participation and our investment in stores”.
Online sales had fallen around 3.0% to £2.54bn in FY2022.
In FY2021, it had recorded multi-channel revenues of £2.6bn, up 6% year-on year. Online trade looked to have fallen back to 31% of overall trade, from 40% the year before.
Online figures before FY2020 as well as UK figures are Retail Navigator estimates.
Stores financial analysis
JD Sports opened 249 new stores in the latest financial year, while closing 248. The disposal of a number of its non-core fashion brands also saw the removal of 74 stores from its estate. This took total group store numbers down from 3,390 to 3,317 although JD bolstered its overall store trading space, with group square footage per store growing from 4,010 sq ft to 4,153 sq ft by the close of the year.
JD’s stores had declined from 3,402 to 3,390 in FY2022, having opened 230 new stores, disposed of 75 stores including 62 Footasylum stores, and closed 167 in the year.
Post closure it divested a further 70 stores on 7 February 2023, having sold several of its sports fashion brands to Frasers Group.
The group now has 85 gyms in its principal UK market.
Total UK stores fell from 762 to 699 in FY2023, although UK sales densities remained static at £605 / sq ft in the year given the changes to overal UK store numbers.
A resurgence in store sales saw overall sales densities rise to around £580 /sq ft in the latest financial year, up from an estimated £535 / sq ft the year prior.
JD said there is “significant ‘white space’ for the JD brand to grow in North America, Europe and Asia Pacific. Accordingly, we anticipate the JD store opening programme will contribute around 5%pts of new space each year through the course of the five-year strategic plan.”
JD Sports spent £539.7m in capital expenditure in the latest financial year, up from £359.3m the year prior. The increase was driven by “the step up” in new store openings to support its long-term plan to increase the number of JD brand fascias around the world by over 1,200 by the end of 2027.
Investment in new stores and gyms was £308.5m, or 57% of the total capital investment. The other major areas of investment were in its supply chain (£151.5m), developing new distribution centre capacity in the UK and Europe, and in further systems development (£79.7m).
JD had spent £213.4m on its store estate in FY2022.
Employees
JD Sports saw its employee numbers rise in FY2023, with 79,717 FTEs. The retailer invested £70m in its people in FY2023, including removing age banding in the UK, now seeing the benefits of this investment through “more productive teams and lower colleague turnover in our stores.”
JD had recorded a sharp rise in FTEs in FY2022, growing to 75,149.
Overall employee numbers had been rising steadily, reaching 60,487 in the 2019 financial year. This number decreased in FY2020 to 56,250 but had subsequently risen in FY2021 to 67,831.
The rise in staff numbers saw sales per employee fall from £134,730 to £132,245 in the latest financial year. Sales per group employee had risen to a high of £146,860 in FY2018 but decreased to £109,640 in FY2020. In FY2021, this had risen to £126,240.
Investment in pay saw JD Sports’ staff cost to sales ratio rise from 13.2% in FY2022 to 14.7%, having risen from 12.7% in FY2020 to 13.3% in FY2021.
Current year
JD said trading in the 13 weeks to 4 May 2024 (Q1 FY2024) was “in line” with its expectations. Like-for-like sales declined 0.7% against a strong comparative (+14.5%) the previous year. Promotional activity in the market remained “elevated” across all regions in the quarter.
The UK “held back” the HD fascia overall, with like-for-like sales down 6.4% for the retailer. Both Europe and North America achieved “double-digit” organic sales growth with Asia Pacific delivering “high single-digit” growth.
JD maintains its full year profit before tax and adjusting Items guidance of £955m to £1,035m.
Forecast
Schultz said he is “confident that the global sportswear market, and in particular, the athleisure space within it, has many years of structural growth ahead of it, with favourable trends like casualisation and active lifestyles continuing.
“We believe that through our growing brand presence, our industry-leading buying and merchandising team, our powerful brand partner relationships and both our strong balance sheet and cash generation capability, we will outperform the market and deliver double digit market shares in all our key markets.”
Retail Navigator forecasts JD Sports to maintain robust high-single digit growth driven by strong international performance and an improving picture in the UK market. Sales should reach nearly £13.5bn by FY2028, with ecommerce share around 25%.
