£700,000 JD stock looted in the riots

A total of 16 stores in London, Nottingham, Manchester and Birmingham were hit by the disorder, with six in London suffering “very significant thefts”. One of its stores is yet to reopen after suffering fire damage.

None of the group’s 20 Yorkshire stores, which include York, Rotherham, Scarborough, Castleford, Leeds, Bradford, Keighley, Sheffield and Hull, were affected.

Footage of attacks on JD Sports stores provided some of the most enduring images of August’s events, while brands stocked by the firm featured extensively in much of the clothing worn by the rioters.

One photograph of a rioting hoodie appeared on the front pages of most newspapers dressed head-to-toe in Adidas gear.

JD Sports said its losses would have been worse if it had not taken pre-emptive measures to stop looters gaining access to its stores.

It added that it did not think the lawlessness would cause long-term damage to its business.

Finance director Brian Small said he is optimistic consumers won’t be turned off JD Sports and sports brands in general by the violence.

“We’re never complacent about those kind of things and of course we think about it,” he said.

“I’m sure that all the brands involved are keen to not be associated with that kind of behaviour in any case and really one hopes that it was a flash in the pan and it will be unrepeated.”

JD Sports took comfort from trading in the seven weeks to September 17, which showed net like-for-like sales at UK and Ireland stores rose 1.6 per cent.

“The last seven weeks trading have been very encouraging and although the riots took place in one of the early weeks of that seven weeks I think that in itself tells a story,” said Mr Small.

The firm, which trades as JD Sports, Size, Bank, Scotts and Chausport, reported a 17.3 per cent fall in underlying pre-tax profits to £16m for the 26 weeks to July 30, down from £19.4m the previous year.

The group said the riots will not have a material adverse impact on full-year profits, which are very dependent on the Christmas performance.

JD Sports is currently working with its insurers on a claim related to £700,000 of looted stock from 16 stores, damage to stores in London, Birmingham, Manchester and Nottingham and business interruption.

First half revenues rose 14.6 per cent to £439.8m.

The firm had flagged in April it would not match 2010/11’s underlying pre-tax profits of £82m in the 2011/12 year due to tough macro headwinds, rises in input costs and the hike in VAT sales tax.

“We are still expecting to meet expectations as they were set in April,” said Mr Small, noting analysts’ consensus forecast of about £72m.

“I think next year (2012/13) we would be more optimistic about a feelgood factor returning,” he said, highlighting the positive impact of the Olympics and European soccer championships.

JD Sports, which ended the first-half with net cash of £19.2m, is paying an interim dividend of 4.1p, up 7.9 per cent.

The firm said it is still on the hunt for acquisitions after deals in Ireland and Spain in the first half. Numis analyst James Dilks-Hopper said: “We think this is an undemanding valuation for a well-managed company with a solid balance sheet ready to take advantage of acquisition and overseas expansion opportunities.”

A JD store in Woolwich in London is still closed as fire damage is repaired, but the rest of the stores were re-opened by August 21.

Executive chairman Peter Cowgill said he expects trading conditions to remain tough.

Bottom-line pre-tax profits increased 21 per cent to £20.1m after being boosted by exceptional items from a joint venture.

Overall like-for-like sales excluding VAT declined by 0.9 per cent in the half-year, which marks an improvement on the 2.8 per cent fall in the first 18 weeks of the first half period. They have returned to positive territory since.

The pressure on margins

JD Sports’ core customers are teenagers and young adults, who are being particularly hard hit by the economic downturn and rising unemployment.

The sports fashion chain has previously warned that it would struggle to pass on cost hikes as its customers see their disposable incomes come under pressure.

Profit margins at its fashion division, which includes its 79 Bank and 37 Scotts stores, came under pressure amid fierce competition on the high street.

The fashion division’s like-for-like sales increased by five per cent in the half-year, but its operating losses increased by £1.4m to £3.4m.

This was as a result of the reduced margin and investment in new stores.