JD Sports sales rise but group carries £15m Blacks’ burden

SPORTSWEAR and outdoor goods retailer JD Sports Fashion reported a slight uptick in sales but said the Blacks chain, which it rescued from administration, will cost it up to £15m this year.

The retailer, which sells goods ranging from trainers to tents, grew cumulative sales at stores open for more than a year by 1.5 per cent in the 19 weeks to the end of June.

Sales from sports outlets were up 1.3 per cent and fashion outlets were up three per cent.

JD added trading is in line with its expectations.

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“The board maintains its belief that the group remains exceptionally well positioned to take advantage of any opportunities, both in the UK and internationally, with its retail propositions, brand connections, financial resources and management experience,” it said.

The chain added Blacks, which it bought for £20m in January, could suffer £10m operating losses and up to £5m of restructuring charges as it bids to revive the business.

While it believes Blacks can return to profit in the medium term, Seymour Pierce retail analyst Freddie George warned this is unlikely until 2015 at the earliest.

JD, which has already closed 81 of the worst-performing Blacks stores, said its immediate priority is to “significantly improve” the appeal of the chain to customers.

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“We remain of the view that Blacks’ market position can be exploited profitably in the medium term,” said the group.

JD, which operates about 355 JD Sports and Size? outlets in the UK, plus 215 Blacks and Millets stores, said trading had improved slightly in recent weeks but warned margins are under pressure amid fierce discounting.

With consumers squeezed by higher bills, rising unemployment, stagnant wages and ongoing economic uncertainty, many retailers are struggling and have been forced to discount to attract shoppers.

The group said this margin pressure, plus extra overheads to support international retail, brands, licensing and online development, will hit its core results, especially during the first half.

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Blacks contributed a £2.2m loss in just three weeks of JD’s ownership. Following its acquisition of Blacks, JD said it found the chain in a “very fractured” state with a severe lack of stock in key lines and a bloated cost base.

Shares in the group added 3.5p to close at 615.5p.

“The market was discounting bad news but like-for-like sales have improved and the scale of the Blacks losses is where we had expected,” said Jonathan Pritchard, analyst at Oriel Securities.

“Many believed that Blacks would lose more than £15m this year but losses are confirmed to be at this level.”

Charles Stanley analyst Peter Smedley said while he sees value up to 1,000p, he sees “no near-term catalyst for the shares”.

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But he added the group is showing its resilience. “We are particularly comforted that the core JD fascia (representing over 90 per cent of group operating profits) is holding up with sports footwear again outperforming sports clothing,” he said. “This gives us confidence that the current sportswear product cycle remains strong.”

Mr George said he expects JD’s first half results in September will be “markedly down” against the previous year but that full-year profits will still be around £68m, down from £74.8m a year earlier.

He said: “We now believe the integration and return to profitability of Blacks will take longer than expected and we now do not expect Blacks will break even until the full-year to 2015 at the earliest.”

JD has around 20 stores in Yorkshire, including York, Rotherham, Scarborough, Castleford, Leeds, Bradford, Keighley, Sheffield and Hull. Blacks has seven Yorkshire stores, which include Leeds, Harrogate, York, Sheffield and Hull.

JD Sports Fashion started life as John David Sports in 1981 with one shop in Bury.

JD is 57 per cent owned by Pentland Group, which has a stake in Lacoste and Speedo.

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