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JD Sports profit falls amid rising inflation and supply chain woes

·Business Reporter, Yahoo Finance UK
·3-min read
A shop sign for JD Sports in central London
Pre-tax profits at JD Sports came in at £298.3m during the period, a fall of 18%, and down from £364.6m the year before. Photo: Press Association

JD Sports (JD.L) saw its shares fall more than 4% in London after it reported a slump in profits in the first half of the year.

The sports retailer blamed rising inflation and supply chain issues affecting international brands, which dragged down the stock of trainers.

Although the results were at the top end of its expectations, pre-tax profits came in at £298.3m ($337.8m) during the period, a fall of 18%, and down from £364.6m the year before.

Revenue grew to £4.4bn in the first half, up from £3.9bn a year ago, thanks to strong summer sales, but profits in North America almost halved.

This was a result of the temporary fiscal stimulus in the US last year, which boosted sales more than usual.

JD further warned that widespread economic uncertainty, inflationary pressures and industrial action could cause additional issues, and hurt trading in the second half of the year.

However, the group did not change its full-year outlook.

“Whilst the overall performance continues to be encouraging and the result for the half year was at the upper end of the board’s expectations, it must also be recognised that the most material trading periods lie ahead,” Andrew Higginson, non-executive chair, said.

“Given the widespread macro-economic uncertainty, inflationary pressures and the potential for further disruption to the supply chain with industrial action a continuing risk in many markets, it is inevitable that we remain cautious about trading through the remainder of the second half.”

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It comes just one day after the company said it would pay £5.5m to former boss Peter Cowgill, who stepped down in the wake of a scandal over corporate governance.

JD Sports was fined £4.3m by the Competition and Markets Authority (CMA) for sharing commercially-sensitive information with Footasylum, the rival it was trying to acquire at the time.

It then incurred a £50m loss from the sale of Footasylum after being ordered by the watchdog to offload the business.

Higginson said on Thursday that although there had been a "period of transition" for the board, it had not impacted the company's financial performance.

Cowgill will take home £3.5m over two years as part of an exit agreement preventing him from taking up a new role at a competitor firm or from advising similar brands.

He will also receive a £2m pay packet for giving his support and insight to the new chief executive, former B&Q executive Regis Schultz, and the JD chairman, over an agreed three-year consultancy period.

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AJ Bell investment director, Russ Mould said: “Life could get a lot tougher for JD Sports given the significant headwinds facing retailers.

“With interest rates set to keep going up for the foreseeable future and consumers starting to feel less confident about job security given the dark clouds over the economy, JD is going to need some highly desirable products on its shelves or its second-half results won’t be a patch on the first-half.

“A reduction in consumer spending combined with the potential for more supply chain disruptions could add up to a nasty cocktail, and one that could give Régis Schultz serious challenges in his first months as the new chief executive.”

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