JD Sports’ chief executive said low unemployment among young shoppers was boosting demand for its fashionable trainers and hoodies as their purchasing power held up, despite the retailer’s annual profits dropping by almost a third.
Pre-tax profits fell to £440mn for the year to January 28, from £654mn in the previous period, after a non-cash £550mn hit related to “cleaning up” previous acquisitions and selling 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. The retailer expects profit to surpass the £1bn mark for the first time this year.
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.
“Our key customer is a young adult, and the young adult today has more possibilities to get a job today than ever, unemployment is at a low level, that means that they get jobs and they can buy the sneakers they love, and I think that’s really helping us a lot,” he said.
“If unemployment stays low and inflation comes down, we should see a good bounce back [in sales] in the UK.”
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.
Schultz said that JD Sports had been managed “like a small business and it’s a £10bn business”. Higginson 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 afternoon. 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.”