Sportswear giant JD Sports has reported stellar sales as the “athleisure” boom turns trainers and hoodies into big business.
The retailer was the biggest riser in the FTSE 100 on Tuesday after underlying sales at its UK stores jumped 10% in the first half of its financial year. The shares were on track for a record close, after climbing more than 8% to 686p on the back of the better than expected figures.
Peter Cowgill, JD’s executive chairman, said Under Armour, North Face and Supply & Demand were among the brands that had sold well at the retailer which bills itself as the “undisputed king of trainers”. He said millennials and generation Z shoppers were attracted to its stores by the company’s use of new technology alongside “vibrant retail theatre”.
JD has cashed in on the shift towards casual dressing across the generations and in the workplace that has made trainers and leggings everyday attire. The retailer has also expanded rapidly at home and abroad: in 2018 it bought the US chain Finish Line for £400m and more recently has swallowed the struggling Footasylum chain as well as Pretty Green – Liam Gallagher’s fashion brand – in the UK.
That buying spree contributed to an almost 50% hike in turnover to £2.7bn in the 26 weeks to 3 August. Pre-tax profits rose 7% to £130m.
Peel Hunt analyst Jonathan Pritchard described the UK sales performance as “exceptional” with JD’s stores a destination for young shoppers: “People don’t come to JD for a browse and a contemplate. They come in knowing that the only place where they are sure to find up-to-date branded footwear or apparel is JD, so there’s no point walking the high street.”
Cowgill used the update to complain about the rash of company voluntary arrangements (CVA) being used by ailing rivals to slash their rent bills. He said the insolvency procedure – which has recently been deployed by Topshop owner Arcadia – meant landlords were treating a “healthy retailer worse than a failing retailer” as they ended up paying far higher rents than neighbours handed concessions.
Cowgill said if struggling brands remained in situ then JD should also be entitled to a rent reduction and the chain was negotiating rent reductions of 30% when leases came up for review. “The bottom line is that if they are still in occupation [post a CVA] 12 months later then that’s the market rent, or else the landlord would have another tenant in,” Cowgill said.
JD is also bringing forward plans to open a warehouse in mainland Europe as it gears up for Brexit. The 80,000 square feet facility in Belgium will be up and running by early 2020.
JD’s run of success – profits have tripled over the past five years – pushed it into the FTSE 100 earlier this year. With a market value of more than £6bn it dwarfs rival Sports Direct which has shed more than a quarter of its value over the past year.
At Sports Direct, Mike Ashley, its chief executive and major shareholder, is battling falling sales and a surprise €674m (£605m) tax bill from the Belgian authorities. He is expected to face a shareholder rebellion at the annual meeting on Wednesday after a trio of proxy voting firms urged investors to vote against his continuing as a director.