JD Sports calls for 'rental realism' as Covid-19 hits footfall

JD Sports Fashion said footfall was weaker in stores reopened after lockdown and called for "rental realism" from landlords as the sportswear chain reported record profit for the year to the start of February.

Pretax profit for the year ended on 1 February rose 3% to £348.5m as revenue rose 30% to £6.1bn. Excluding exceptional items of £90.3m pretax profit rose by £110m to £465.6m.

JD's financial year ended before Covid-19 affected sales and operations in the UK and other markets such as Italy and the US, where JD bought Finish Line in 2018. JD closed its first stores, in Italy, on 11 March followed by then US and UK. British stores reopened in June.

The FTSE 100 company said footfall soon after reopening had been weaker in malls and shopping centres, especially in Northern Europe at weekends, as consumers remain wary of shopping at close quarters. JD said there was lots of uncertainty about the effect of Covid-19 and that it would have a "material impact" on results in the current year.

The company has refused to pay rents to landlords during the Covid-19 shutdown and has demanded reductions and rent holidays for the time its shops were shut. It bought its Go Outdoors chain out of administration after complaining about unrealistic and inflexible rents at Go Outdoors' stores.

Executive Chairman Peter Cowgill said: "We were encouraged by the continued positive trading in the early weeks of the year prior to the emergence of Covid-19 and we firmly believe that we are well placed to regain our previous momentum.

"Looking longer term, there is inevitably considerable uncertainty as to what the effect of Covid-19 will be on consumer behaviour and footfall with future store investments highly dependent on rental realism and lease flexibility."

Analysts said guidance on current trading was frustratingly sketchy compared with some other retailers.

Richard Hunter, head of markets at Interactive Investor, said: "The results cover the period to 1 February and as such shine next to no light on the current situation. JD Sports references Covid-19 ramifications throughout the release without attributing any numbers to the financial impact, save that it is likely to be material."

Cowgill said social distancing measures affected shops like JD particularly because they attract high levels of visits at times like weekends and school holidays. This is most true in malls and city centres where stores will be particularly affected if distancing measures stay in place in the run-up to Christmas.

"Recognising that rents effectively buy footfall, we will continue to push for greater correlation between levels of footfall and rents payable across our physical retail estate," Cowgill said.

JD shares fell 1.1% to 667.20p at 09:44 BST. The shares have more than doubled since dropping to 293p on 18 March as the UK entered lockdown to contain the Covid-19 pandemic.

As previously announced, JD paid no final dividend to save cash. Cowgill indicated the group would stick to its traditional policy of reinvesting cash in the business instead of making big payouts to shareholders when it returns to paying dividends.

"It is the board's current intention that we would look to resume dividend payments when conditions allow, although it is important that we maintain flexibility around the timing and quantum of this commitment. Regardless, we continue to believe that it is in the longer term interests of all shareholders to keep future dividend growth restrained so as to maximise the available funding for our ongoing development opportunities."