JD Sports' profits boosted by fashion for fitness wear

Image source, JD Sports

The fashion for wearing running shoes and tracksuits as day-to-day clothing has given JD Sports a spring in its step as it reported record profits.

The "athleisure" trend led to an 81% increase in pre-tax profits last year to £238.4m.

Even the previously loss-making outdoor brands, Millets and Blacks, have made money for the first time since JD Sports acquired them.

But the company warned of possible inflationary pressures later this year.

Peter Cowgill, executive chairman, said "JD's continued strength in its core markets is increasingly being complemented by momentum in our international development, with a net increase of 54 JD stores across mainland Europe during the year."

Like-for-like sales, which strip out the impact of new stores opening, grew 10% over the year.

The company has 900 outlets in the UK. The group opened 54 stores across Europe last year and opened a further two stores in Malaysia. The first JD store in Australia is due to open shortly.

"Whilst we must recognise that there are external influences which may impact the latter part of the year, notably inflationary pressures arising from Brexit, the board remains confident in the robustness of the JD proposition and believes that the group is well positioned for further profitable growth," said Mr Cowgill.

Jonathan Pritchard, retail analyst at Peel Hunt, said "Whilst the trainer trend tailwind has been off the Beaufort scale, JD has sailed it skilfully. Both sports fashion and outdoor exceeded expectations."

JD's share price rose 4.2% after the bumper results were published.

'Unbalanced view'

It has not all been plain sailing for the brand in 2016, however.

A Channel 4 undercover investigation in December quoted workers saying conditions at its Kingsway distribution centre in Rochdale were "worse than a prison". JD Sports denied allegations that it operated a "three strikes" policy before dismissing workers over minor misdemeanours such as being caught with a cigarette lighter or using mobile phones, and that workers were being underpaid.

"We were greatly disappointed to be the subject of allegations made in late 2016 about working practices in our Kingsway warehouse," the company said in its results statement.

"As the well-being of all staff is a key priority for the group and it is an area where we strive continually to improve performance, the Board appointed Deloitte to conduct an independent review of the allegations made.

"That review has now been completed and Deloitte's conclusion was that the allegations did not represent a balanced characterisation of working practices at Kingsway."

The full report has not been published. But JD Sports chief executive Peter Cowgill told the BBC that the report broadly bore out the firm's denial of wrongdoing.

"I think if you take a very, very small minority [of cases], then the tone sometimes could have been improved, but overall, the content of that facility which is open for all to see - we invite anybody, within reason, to visit it... people are staggered by the standards in that facility.

"We conducted an independent report, and that bears out what we said in the first place."

Mr Cowgill said that while safety-related rules over the use of mobile phones, lighters and matches in the warehouse would continue to apply, the term "strike", meaning a warning, had been eradicated.

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