Shares in JD Sports Fashion (JD.) cheapened 2.6p to 672p on Tuesday after the sports fashion purveyor warned it is seeing weaker footfall since reopening, with shoppers worried about visiting densely occupied enclosed spaces, and cautioned COVID-19 will have ‘a material impact’ on its results for the year to next January.
Nevertheless, executive chairman Peter Cowgill insisted his trainers-to-tracksuits selling charge is ‘well placed’ to regain its pre-pandemic momentum as he reported another set of record results.
Covering the period before lockdown put the retail sector into deep freeze, JD Sports’ results for the year ended 1 February were strong, showing 30% group revenue growth to £6.1 billion, driven by impressive like for like sales growth in its global Sports Fashion fascias.
JD Sports also generated a 31% surge in pre-exceptional pre-tax profit to £466 million, although despite closing the period with a near-£430m net cash pile, the retailer prudently passed on the final dividend.
SHOPPERS STILL SKITTISH
The majority of JD Sports’ stores are now trading again, although the initial footfall has been weaker in malls and shopping centres, particularly in Northern Europe at weekends, as ‘consumers remain nervous about the risks associated with densely occupied enclosed spaces’.
Cowgill commented: ‘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. Ultimately, however, we remain confident that we have a market leading multi-channel proposition which has the necessary flexibility and agility to prosper within a retail environment that may see profound and permanent structural change.’
Shore Capital reiterated its ‘buy’ rating on JD Sports Fashion, which has re-acquired its struggling Go Outdoors business from the administrators, arguing the company will be a retail survivor given ‘the strength of its balance sheet and its customer proposition’.
The broker insisted JD Sports Fashion ‘remains a well-managed company with tight stock and cash controls and good cash generation reflected in its strong balance sheet’, and continues to ‘highlight the international opportunity, particularly in the US with the Finish Line acquisition, where there remains a significant opportunity to continue to grow the gross margin with the introduction of fashion clothing lines.’