JD Sports buoyant in Q2 as it bounces back from earlier slowdown

JD Sports Fashion may have had some downs as well as ups this year, but its Q2 trading update on Thursday (22 August) showed it’s back to seeing mainly the latter.

It talked of a “strong, agile multi-brand model” delivering sales growth on both an organic and like-for-like (LFL) basis during the quarter.

Earlier this year the company’s shares had fallen after it said it saw soft sales in Q4 and analysts speculated that the importance of Nike to the chain was a problem as that brand’s sales story faltered.

So what happened in the 13 weeks to 3 August? We’ve already said that sales rose on an organic and LFL basis (by 8.3% and 2.4%, respectively). 

Trading on a constant currency basis was in line with its expectations. Clearly, its performance improved radically in Q2 (it had earlier flagged that Q1 would be soft) as for the first half as a whole, organic sales rose only 6.4% and LFL sales edged up just 0.7%.

The quarter-on-quarter trading improvement was driven primarily “by the strength of our multi-brand operating model” but it was also helped by “softer comparatives with the previous year”.

Regionally, LFL growth was strongest in North America (+5.7%) and Europe (+3%), while the UK “improved materially” quarter-on-quarter. 

Organic growth was achieved in all regions, led by North America with a 13.7% jump. All three main segments — JD, Complementary Concepts and Sporting Goods & Outdoor — achieved LFL growth and the JD segment benefitted from new store openings to deliver 11% organic growth.

The company admitted that the overall market is still volatile, but said “we showed good promotional discipline and managed inventory proactively to support gross margins in the period”. 

That said, the group gross margin was down 30bps to 48.4%, mainly due to apparel and online, “where its higher penetration resulted in the UK being most impacted”. 

But again, there was clearly a Q2 improvement as the overall H1 gross margin was 48.3%.  

The company said the completion of its Hibbett buy in late July means it now has “a great addition to our Complementary Concepts segment in North America and adds material scale and presence in the US through its 1,179 stores, strengthening further our brand relationships in the world’s largest sportswear market”.

That business also “provides an enhanced platform for the mall-led, nationwide growth of the JD brand in North America through its efficient supply chain and strong back office”.

In the first half as a whole, the company opened 85 new JD stores, which along with the Hibbett buy and the ongoing disposal of non-core stores, meant it ended the period with 4,506 stores, up 1,189 from the start of the year.