JD Sports resumes guidance, scraps dividend on cautious outlook

JD Sports Fashion forecast annual pre-tax profits of at least £265m as it scrapped an interim dividend and reported a slump in half-year earnings caused by the coronavirus pandemic.

The High Street chain said Covid-19 remained an “ongoing challenge” as countries reimposed lockdown measures, forcing temporary store closures amid persistently weak retail footfall. Pre-tax profits for the six months to August 1 fell to £41.5m from £129.9m.

Revenues fell to £2.54bn, down from £2.72bn a year ago.

“Reduction in profitability has arisen as a result of the additional costs associated with this shift in revenues to online channels particularly during period of temporary store closures,” JD Sports said, adding that making its stores Covid-safe had also increased costs.

JD Sports said sales had received an initial boost after lockdown measures were eased, especially in countries where fewer people shopped online, but this had been “generally short lived” with footfall into stores significantly weaker than historic levels, particularly across Europe.

“Some of the weakness in footfall has been offset through better conversion and higher average transaction values as those consumers who visited physical retail did so with greater intent,” the company said.

Richard Hunter, head of markets at interactive investor said: "With the company moving quickly to amend its online model where possible, and with the US business providing a significant tailwind in the meantime, the numbers have been well received, and the market consensus of the shares as a strong buy should on balance remain intact.”

“The numbers overall are something of a curate’s egg with the pandemic providing some opportunities, but for the most part hurting the retailer as has been the case across the sector. Even so, the positives reveal some tantalising possibilities for prospects."

AJ Bell investment director Russ Mould noted that the figures "coincided almost exactly with the onset of the coronavirus pandemic" with the full-year profit guidance above expectations.

"The simple fact of restoring guidance in itself will reassure the market. It demonstrates that JD Sports is on top of the things you need to be a successful retailer in the 2020s, in particular being able to sell its product as readily online as it does in its shops."

“What comes after the current financial year is open to question. Part of its target market could be vulnerable to unemployment, particularly assuming the furlough scheme in the UK ends as planned in October. But with the company’s clear retail expertise and a very strong balance sheet it should be a sector survivor.”