JD Sports suffers ups and downs in its last year and in the fourth quarter

JD Sports Fashion is an example that the strongest companies also face difficulties, and its latest results update presented on Thursday and covering the period of 53 weeks to February 3 (fiscal year 2024), shows a lukewarm sales growth in some areas, especially in the fourth quarter.

Total sales were £10.5bn, up 3.6% on the previous year, although this figure includes a 6.2% negative impact from disposals and a 1.4% profit for week 53. Pre-tax profits for the year are expected to be in a revised range of between £915m and £935m.

The group’s gross margin ended the year at 47.3%, 50 basis points below last year, largely due to a greater mix of sales from Europe and North America, where margins were affected by promotional activity more intense in those markets.

Regarding the fiscal year 2025, the evolution of operations since the beginning of the new year has been as expected. “The market situation remains complicated due to lower product innovation and high promotional activity in key markets, especially on the Internet,” they explain. The company expects trading conditions to improve as the year progresses, “driven by an active sporting summer, softer year-over-year comparisons beginning in the second quarter, and an improving product portfolio toward the end of the year.”

Given all this, the first quarter is likely to be the weakest period of the year on a comparable basis, and the second half to be stronger than the first. But cost inflation remains high, especially labor costs.

So it expects comparable sales growth of between 1% and 4%, with organic sales growth between 6% and 9%. Profit before tax should be between £900 million and £980 million and after tax between £955 million and £1,035 million.

In fiscal 2024, organic sales increased by 8.4% and in real terms by 4.2%. In the UK and Ireland, full-year organic sales increased 1.5% and comparable sales increased just 0.8%.

Those two figures in the rest of Europe were better, with a rise of 15.3% and 7.7% respectively. In North America they were 9.3% and 4.1% and in Asia-Pacific they were 17.7% and 11.8%.

In the fourth quarter, group sales increased by 4.4% organically and just 0.1% in comparable sales. In the UK and Ireland, these two figures were negative, at 2.5 and 3.2% respectively. This was mainly due to two factors. The region has the largest apparel sales mix of the group, and apparel sales results were worse than footwear sales. In addition, he preferred not to fully participate in the great promotional activity, especially on the Internet, that took place in the fourth quarter.

In Europe, these figures were positive, with 8.9% organic and 0.9 on a comparable basis. For the JD brand, the strong commercial activity that occurred in southern Europe, especially in Portugal and Italy, was partially offset by weaker commercial activity in northern Europe. This is partly explained by the greater mixing of clothing in the north. The impact of new store openings in Europe contributed to that 8.9% organic growth in the fourth quarter.

In North America they rose 7.7% and 2.1%, compared to an increase of more than 30% the previous year, in a market with a high level of promotions. New store openings drove that organic sales growth to 7.7%.

In Asia-Pacific they increased 12.3% organically and 8.3% on a like-for-like basis, with contributions from all major markets and particularly strong growth in New Zealand and Thailand. Again, the opening of new stores led to this organic growth in the fourth quarter.

The company referred to high promotional activity in the market, especially on the internet, and very tough comparative figures in January.

But the group continues to increase the number of stores at a good pace and opened 215 new JD stores during the year. Additionally, the launch of its new JD Status loyalty program in the UK has been very successful, with 800,000 downloads to date.

CEO Régis Schultz said: “In fiscal 2024, we outperformed the sportswear market, reflecting the strength of our business. We achieved comparable store sales growth of more than 4%, growth organic growth of more than 8% and organic growth of more than 10% in our sports fashion stores.

“We have made great strategic progress and opened 215 new JD stores, we have focused all our efforts on developing JD and improving EPS by taking full control of ISRG and MIG.”