JD Sports expects profits to top £1bn for the first time next year as better-off young shoppers snap up its trainers and hoodies.
“Our average customer is young and today they are getting more revenue than in the past,” said Régis Schultz, who took over as chief executive of the FTSE 100 sportswear group in September after his predecessor’s unceremonious departure.
He added that a tight employment market and rising minimum wages in many countries meant their disposable income was increasing despite rising energy and borrowing costs. Many still lived at home with their parents “and don’t have to pay the rent, the mortgage or the utilities”.
Inflationary pressures were stabilising, he said, noting that freight rates and factory-gate prices were lower and that consumers and businesses were learning to live with higher energy prices.
Profits in the current financial year, which ends in February, will be towards the top end of a range of analyst forecasts, currently £985mn with an average of £960mn, according to Bloomberg, after a stronger second half including a bumper Christmas.
“We had our best week ever in all our markets,” said Schultz. JD’s total sales rose more than 20 per cent in the six-week period to New Year’s Eve.
An upgrade to current year guidance was largely expected after sportswear company Nike, for whom JD is a key distribution partner, made positive comments about trading in December.
Schultz said JD Sports had sold 2.6mn pairs of Nike’s Air Force One trainers worldwide in the final three months of 2022 and that improved supply in the US had been a major factor in the company’s revenue momentum.
“We had a lot of stock issues in the US but we’ve had much availability in the second half,” he said.
As a result, sales growth of 5 per cent during the first half accelerated to “more than 10 per cent” in the second. There had been some “very modest” price increases but rising volumes were the main driver.
Shares rose almost 7 per cent in early London trade. Barclays analyst Richard Taylor said sales “had been very strong” and that the update statement “appears to allay concerns that JD has been forced to discount heavily to clear inventory”.
Schultz is due to host an investor day next month in which he will set out his strategy for the group, which under the leadership of former executive chair Peter Cowgill grew rapidly by focusing on relationships with key suppliers and growing exposure to the US market.
But Cowgill was ousted in May last year amid growing concerns about governance, oversight and succession planning at the company. He is still an adviser to JD and has signed a lucrative agreement that prevents him from working for rivals or poaching senior executives.
Schultz said the management team considered that the sports fashion segment offered by far the most significant opportunity for further growth. But he stressed this did not mean a sale of the outdoors division, which includes Blacks, Millets and Go Outdoors.
“JD is 80 per cent of our profit and sales . . . but that does not mean we don’t want to do other businesses,” he said. “There is a role for the outdoors and secondary athletic brands.”
One of Schultz’s first moves was to sell a collection of minor apparel brands that he regarded as “a distraction” to rival Frasers Group.