JD Sports Fashion, which sells sportswear for people who are not necessarily interested in participating in sporting activity, said its margins are under pressure as even fashion-conscious consumers are looking for bargain prices on designer-labelled products.
"Margins remain under pressure as consumers continue to be offer driven," admitted Peter Cowgill, Excecutive Chairman of JD Sports.
"Trading in the early part of the current financial year has been satisfactory in the core UK and Ireland fascias with net like-for-like sales for the nine weeks to March 31st 2012 of +1.2% (Sports Fascias +1.0%, Fashion Fascias +2.3%)," Cowgill added.
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Not surprisingly, the group is looking forward to a sales lift from this year's big sporting events, the Olympics and the UEFA football championship.
The group's revenue for the year ended January 28th was £1,059.5m compared to £883.7m the previous year, while cost of sales rose from £446.7m to £538.7m. Overall gross like-for-like (LFL) sales for the period in the UK and Ireland combined core retail segments increased by 0.6%.
Profit before tax fell 14.2% from £78.6m to £67.4m as exceptional charges rose to £9.7m from £4.3m the year before. Underlying profit before tax declined 6.9% to £76.0m from £81.6m the year before. Meanwhile, the gross profit margin fell to 49.2% from 49.5%, which the group attributed to the acquisition of new businesses during the year. Excluding the impact of these acquired businesses the margin on a LFL basis increased by 0.2% to 49.7%.
Cash at the end of the period fell from £87.5m to £61.6m, largely the result of a number of acquisitions throughout the year, including struggling camping equipment chain Blacks, but also because of investment on its Kingsway warehouse facility.
In the three weeks from acquisition to the end of JD's financial year Blacks generated revenues of £5.9m, but delivered an operating loss (excluding exceptional items) of £2.2m, which management attributed to the lack of stock in the business and the inheritance of an excessively large and over-rented store portfolio, as well as a disproportionate central cost base.
The group said that international development will be "a key foundation" for its future, and further investment in its infrastructure overhead will be needed to deliver sustained profitability from its overseas operations.
The final dividend was increased by 10% to 21.2p (2011: 19.2p) bringing the final dividend to 25.30p per share. (2011: 23p).
"Whilst we expect some improvement in consumer confidence from the forthcoming international sporting events, we remain cautious," Cowgill said.
"Whilst the board recognises that current expansion activity is likely to impact returns in the short term, it remains confident that the group is being positioned to deliver longer term earnings growth and increasing shareholder returns," Cowgill said
NR/JH
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