JD Sports Fashion has condemned the Government’s VAT rise, arguing it is set to lose about £16m in sales next year due to the 2.5 percentage point increase.

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Chief executive Barry Bown said the VAT increase is “certainly not good” for the company and was cautious about the upcoming year. He said JD will lose £16m sales in the year to January 28, 2012 because it is absorbing the rise in VAT to keep prices flat. “It doesn’t help us at all in that the biggest problem is we can’t pass it onto the consumer,” he added.

This week JD reported pre-tax profits for the year to January 29 up 28% to £78.6m. Total group sales were up 15% to £883.7m, with like-for-likes up 3.1%. Gross margins improved to 49.5%.

Current trading has softened, with like-for-likes increasing 0.4% in the eight weeks to March 26, although JD said it was hard to make a comparison as Easter fell earlier last year.

Bown said the retailer is cautious because all the news, such as the March BRC figures, paints a difficult picture. He said: “Everybody you talk to are viewing things with caution and we certainly have that sentiment.”

Bown also reiterated that JD is no longer interested in buying beleaguered sports retailer JJB Sports after it pulled out of acquisition talks in March. He said: “It’s gone - the way the new deal has been structured with the management there it excludes us now.”

He said JJB could have been “a little more open with information”.

JD is seeking to rationalise its store portfolio, although chairman Peter Cowgill said: “With the current economic climate impacting heavily on retail property occupancy levels, it remains very difficult to dispose of underperforming and/or duplicate stores.”

Bown said JD would seek to open more stores across its fascias but “not necessarily as aggressively as the past as JD is very mature now in its locations in and around the UK”.

He said international is firmly on the agenda for growth. The retailer is looking at potential acquisitions and joint ventures in other markets.

To find out more about JD Sport’s strategy and performance read Retail Week Knowledge Bank’s profile: retail-week.com/jdsports