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Sales fall further at JD Sports due to World Cup 2010

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Sports and fashion retailer JD Sports has reported a further decline in trading levels since the start of its financial year, in an interim management statement published today.

In April the firm reported that UK & Ireland like-for-like (LFL) sales for the first eight weeks of its financial calendar to March 26th 2011 dropped 1.2 per cent but in the year to June 4th this has worsened to a decline of 2.8 per cent year-on-year.

Those who follow retail results may have tired last year of the number of companies which sell TVs and sporting goods blaming the poor performance by England at the 2010 World Cup for depressed trading, but once again the football showcase seems set to be a popular reason for low sales over the next couple of months.

JD points out that the last ten weeks have coincided comparatively with last year’s build up to the global sporting event, and this contributed to the three per cent fall in sports fascias sales and 1.6 per cent drop in fashion fascias sales in the first 18 weeks of the year.

Although the drop in trading is not ideal it had been anticipated by JD, and the retailer’s perception of the UK market remains unchanged from when it published its April update.

“Our cautious outlook at the time of that announcement remains unchanged and continues to be based on the very clear downward pressures on levels of gross consumer expenditure in our market and the increased VAT take from such expenditure,” today’s company statement read.

“Overall group trading remains in line with management’s expectations at that time.”

Retail spending in the sports segment has been fairly muted for a prolonged period, as demonstrated by the problems that nearly caused rival JJB Sports to fall into administration in March, but JD has been outperforming the market over the last year or so.

Analysts at Investec Securities Katherine Wynne and David Jeary argue that JD is still the pick of the UK sports retailers but say also that World Cup comparisons are obviously having a negative impact on trading.

Wynne and Jeary said: “The sports division has moved from an LFL decline of 1.4 per cent after eight weeks to three per cent after 18 weeks. Last year the LFL comparative strengthened by 210bps over this period, leading up to the World Cup.

“The fashion division’s LFL performance moved from flat after eight weeks to a 1.6 per cent decline after 18 weeks, against a 230bps strengthening last year. On an unweighted basis, this implies that LFL sales were down around four per cent in sports and three per cent in fashion over the last ten weeks.

Unfazed by tough trading conditions, JD says that it remains in a strong position to purchase brands and expand its business in the near future and the Investec analysts agree that the retailer will be looking to grow further given the opportunity.

“JD’s balance sheet strength puts it in a good position to take advantage of other commercial opportunities,” Wynne and Jeary added.

“The recent acquisition of the Peter Werth and Pink Soda brands show JD’s ambition to extend and actively manage its brand portfolio.”

Published on Thursday 09 June by Editorial Assistant

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