viewJD Sports Fashion PLC

JD Sports strengthens online business as it forecasts prolonged low footfall

Footfall is expected to remain uncertain for the foreseeable future due to the impact of social distancing

JD Sports Fashion PLC - JD Sports looks at online business as it forecasts prolonged low footfall

JD Sports Fashion PLC (LON:JD.) said it has invested further in its main warehouse, near Manchester, as it expects a permanent shift of demand to online shopping following the coronavirus pandemic.

The ‘athleisure’ retailer said it is “very clear” that customer footfall will remain uncertain for the foreseeable future due to the impact of social distancing.

READ: JD Sports confirms Go Outdoors administration notice

JD Sports has historically attracted high numbers of customers at weekends and school holidays, mostly in major shopping malls and city centres.

However, since the reopening of stores last month, customers have preferred less enclosed spaces such as high streets and out-of-town retail parks, where the FTSE 100-listed firm has a smaller presence.

“Recognising that rents effectively buy footfall, we will continue to push for greater correlation between levels of footfall and rents payable across our physical retail estate,” the company said in a statement accompanying its full-year results.

JD Sports also announced that it is applying for a judicial review to the Competition Appeal Tribunal against the ruling from the Competition and Markets Authority (CMA) to ban its acquisition of rival retailer Footasylum.

The CMA vetoed the merger, which was completed in May last year, and requires JD to sell the business back to the vendors. The application for a judicial review will run in parallel with the divestment process, while in the meantime both businesses are being operated separately.

In the year to February 1, 2020, JD said its revenue by jumped 30% to £6.1bn, driven by strong growth in global like-for-like sales, while profit before tax was 3% higher at £348mln mainly due to non-cash impairments following the acquisition of Go Outdoors.

A final dividend was not recommended to save cash, as previously announced.

A mixed outlook for analysts

"JD Sports’ meteoric rise may have come to a grinding halt as a result of the pandemic, but its attractions remain in light of its plans for further expansion," said Richard Hunter, head of markets at interactive investor.

According to the analyst, the Footasylum contestation is "an unwelcome development" considering its additional cost, time and management focus in a time of crisis, while the outcome is unclear.

The retailer is expected to sacrifice gross margin certain lines of stock will be sold at knock-down prices for either seasonal or fashion reasons.

"Alongside the fact that the company has been able to regain some of its former momentum since its stores have now reopened, there is now a question of how the mix of physical and online shopping will evolve, and the implications that could have on the company’s store portfolio," Hunter commented.

Shares were muted at 674.8p early on Tuesday.

--Adds analyst comment, shares--

Quick facts: JD Sports Fashion PLC

Price: 700.6 GBX

Market: LSE
Market Cap: £6.82 billion

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