Tucked away in JD Sports Fashion’s impressive trading statement was a pledge to continue investing in its infrastructure to improve its online and in-store offerings.
An ever-growing emphasis on providing an improved omnichannel service is a trend that has emerged in the retail space.
Take Primark, for example, which recently dipped its toes into the online space with its click-and-collect trial despite its previous insistence on being a solely brick-and-mortar player (even throughout the pandemic).
Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown attributes much of this to a switch in consumer habits.
“Checking out the latest styles in store before buying at tills, or late online, is now the trend of the moment,” Streeter said.
New habits were born as a result of the pandemic, which highlighted the convenience of online shopping but also created pent-up demand for an in-store experience.
Meeting these consumer demands is one of many benefits a strong omnichannel offering creates for retailers such as JD Sports.
Online shopping also opens several avenues to target customers, whether that be on mobile through an app, online or in-store, expanding the shopping hours and creating a 24/7 store.
While the benefits are apparent, setting up a strong online presence is not without its costs.
Infrastructure, such as warehouses must be established, stocked and staffed, and delivery drivers must be paid a salary plus expenses, including fuel. A costly and timely process.
JD Sports’ position as a global retailer, with markets in the US and Europe, means it needs to build these channels across several regions.
Yesterday’s trading update, however, suggests chief Régis Schultz believes there’s an opportunity.
Zainab Atiyyah, a Third Bridge retail analyst, echoes that view: “There is plenty of room for improvement in their after-sales workflow and customer retention programmes.”
John Stevenson, a retail analyst at Peel Hunt points out that JD’s strong balance and chief executive Schultz’s belief that more value can be extracted by improving its online offering suggests cash is available to scale those operations.
Given the costs and time associated with growing its online presence, a buyout of a competitor could be an option, for example, ASOS, where the infrastructure is already in place.
ASOS is currently valued at £673mln, so JD would certainly have the cash available for a buyout (JD Sport’s net cash balance as of 30 July 2022 stood at £1.01bn.)
With that being said, the “last thing JD is going to do is buy fashion,” retorts Stevenson.
“JD announced before Christmas that it got rid of some of its ancillary brands which were non-core.”
“The message from that was pretty clear, which is they’re absolutely focused entirely and only on sport fashion.”