Profits jump but JD Sports ‘extremely cautious’ over the economic outlook

The group, which operates 350 JD Sports and Size? outlets in the UK, said underlying profits increased to £81.6m in the year to January 29, on sales up 15 per cent to £883.7m.

But the Bury-based retailer said net sales had declined by 1.2 per cent in the first eight weeks of its financial year and warned that Government austerity measures had significantly impacted the retail environment.

This, combined with January’s increase in VAT to 20 per cent from 17.5 per cent and hike in its costs, left it “extremely cautious” about its outlook.

Numerous retailers, including HMV, Mothercare, Currys and PC World parent Dixons Retail, have issued profits warnings in recent weeks after consumers suffered their first decline in disposable income for 30 years, as wages fail to keep pace with rising infla- tion.

JD Sports has performed well in recent months after stealing market share from its ailing rival JJB Sports but revealed it is not immune from the squeeze on the high street.

Investec analyst Katharine Wynne believes that young customers, who make up JD’s core customer base, are suffering disproportionately from higher unemployment and the Government spending cuts, making it harder for the group to pass on its rising costs.

JD has expanded its appeal in the past year after it acquired brands such as Sonneti, Chilli Pepper and Nanny State, and rugby brands Kooga and Canterbury to help give it a point of difference over competitors.

It also moved into France, with the acquisition of Chausport, which has 73 stores, and it recently opened the first JD Sports stores in the country.

A recent approach to buy JJB was given shrift by its rival which refused to give it enough information to put in a proper bid.

JD said it has net cash of £86.1m which will give it the firepower to take advantage of further opportunities that may arise.