Sportswear retailer JD Sports said profits for the first half of the year were at the top of its expectations but warned that inflation and supply chain disruption were major risks in the months to come.
JD Sports chair Andrew Higginson said sales were up about 8 per cent in the first six weeks of the second half before the impact of recent acquisitions.
“Whilst the overall performance continues to be encouraging and the result for the half year was at the upper end of expectations . . . it is inevitable that we remain cautious about trading through the remainder of the second half.”
He cited economic uncertainty, inflation and the potential for further disruption to the supply chain as major risks.
Pre-tax profit before exceptionals for the six months to July 31 was down 13 per cent to £383mn, but that was better than many analyst forecasts, which averaged just below £380mn.
Trading in the first half of the previous year was boosted by the American Rescue Plan, under which the US federal government made grants of $1,400 to every citizen to help with the economic impact of the Covid-19 pandemic.
Following acquisitions such as Finish Line in 2018 and more recently Shoe Palace and DTLR, almost a third of JD’s revenue is generated in the US.
Shares in the group were down about 4 per cent at 118p in early trading. RBC analyst Richard Chamberlain noted the sharp rise in inventory levels, which were 43 per cent higher than last year.
“JD’s stock position was tight at this point last year . . . but higher levels of inventory will be a concern,” he said.
Many retailers have built up more stock earlier than usual this year, to try to forestall further supply chain disruption in the run-up to Christmas. But if peak-season sales do not match expectations, they could be forced to sell the excess stock at a discount, hurting profits.
Higginson said it was “reassuring” that recent boardroom upheaval had not affected the group’s financial performance.
Longstanding executive chair Peter Cowgill was ousted in May following disagreements about how to improve governance, with non-executive director Kath Smith stepping up to run the company until Higginson was appointed chair in July. A month later, Régis Schultz was appointed chief executive.
Smith will shortly resume her non-executive role.
JD revealed on Wednesday that Cowgill would be paid more than £6mn in the coming years, comprising almost £1mn of salary in lieu of notice, £2mn for consultancy services and £3.5mn in return for not launching a rival business or poaching staff.
“Peter has hugely valuable experience, built over 18 years, which we do not want to lose,” said Higginson.