JD Sports: Blacks could make £15m loss this year

New owner of outdoor equipment & clothing retailer Blacks, JD Sports, has reported today that the acquired business made a loss of £2.2 million in the first three weeks of ownership.

JD Sports now anticipates that the struggling company is likely to make a loss of £10 million during the current financial year, although this figure could rise by a further £5 million due to charges associated with its restructuring.

Blacks was bought out of administration by the sports retailer in January for £20 million, after the previous management failed to stem the losses caused by consistently declining sales.

An “excessively large and over rented store portfolio” and a “disproportionate central cost” have been blamed by JD Sports for Blacks continued loss-making performance, and the sports specialist says that these issues are now unlikely to be resolved until the start of the next financial year.

A statement from JD Sports today read: “The bulk of the operating loss in Blacks will occur in the first half.

“Whilst the business continues to restructure its store portfolio and operate with legacy buying decisions, it is difficult to be more precise on the short term outlook, but we remain of the view that Black‘s market position can be exploited profitably in the medium term.

“Our immediate priority is to significantly improve the customer proposition.”

Like-for-like (LFL) sales at JD Sports during the 19 weeks ending June 9th 2012 increased by 1.5 per cent year-on-year (+1.2 per cent in sports products and +3 per cent for fashion goods), which was broadly in line with expectations.

During the previous financial year, ending January 28th 2012, JD Sports reported a 14.2 per cent drop in profit before tax, largely due to the Blacks takeover, as LFLs jumped 19.9 per cent year-on-year.

Sales growth slipped to just 1.2 per cent during the first nine weeks of the year and according to this latest update first half profits for its core retail business are expected to be significantly reduced due to additional overheads relating to brands, licensing and multichannel development.

JD Sports statement continued: “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.”


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