JD Sports boss: rent talks with landlords ‘like wading through mud’

Business

The boss of JD Sports today hit out at landlords who refuse to negotiate on rents and warned of potential store closures.

The athleisurewear chain’s executive chairman Peter Cowgill said building owners weren’t acknowledging a shift in consumer spending from stores to online.

He said of negotiations: “We are knee deep in mud. Some people say it’s like wading through treacle but it’s thicker than that. It’s amazing that there has not been a recognition of the channel shifts that are occurring.

“If rents are unacceptable there is only one outcome and that’s very negative there are using the short term protection of leases without recognising there is a serious long term shift.”

He said footfall in city centres remains low. “London is still pretty dead. Nowhere near where we were,” Cowgill said. “What we have to remember is that London is the most expensive area. The rents are now completely unacceptable for the level of footfall that we are seeing. They are just out of context.”

The company warned that a boost in store sales seen as shops reopened after lockdown was “short lived” and it is counting the cost of making shops safe.

The sportswear retailer said that pent up demand and sales of old stock initially aided revenues when shops were allowed to reopen, including on June 15 in England. This was particularly noticeably in countries where fewer people shopped online pre-Covid, it said.

But the company told investors: “However, that boost was generally short lived with footfall into physical retail continuing to be significantly weaker than historic levels in all of our geographies but particularly across Europe.

“Some of the weakness in footfall has been offset through better conversion and higher average transaction values as those consumers who visited physical retail did so with greater intent.”

Sales since reopening were still up 20% on last year, “heavily influenced” by strong growth in the US where government fiscal support has helped spending but is coming to an end.

Overall, first half revenues slipped to £2.54 billion in the 26 weeks to August 1, down from £2.72 billion in the same period last year.

Profits fell to £61.9 million from £158.6 million. “Reduction in profitability has arisen as a result of the additional costs associated with this shift in revenues to online channels particularly during period of temporary store closures,” JD said. Making stores safe from the spread of Covid has also heaped on cost, it said.

However, JD still expects to make profits of £265 million. Previous expectations were for full year profits to hit between £96.2 million and £206 million.

JD shares – which were below 200p five years ago and hit all-time highs of 878p in February – have tumbled 14% overall this year. However, they have rallied back strongly to around 725p of late.

The shares, which fell as low as 293p at the onset of the pandemic, rose 8% to 779p today.

Cowgill said the results “reflect the loyalty of the JD customer” with High Street rivals in crisis and slashing jobs.

He said there were no plans for “any major job losses” despite noting that margins were lower in its booming online arm than in stores.

AJ Bell investment director Russ Mould said: “When you consider this performance coincided almost exactly with the onset of the coronavirus pandemic that is a notable achievement and has the coda that full-year profit guidance is above expectations. The simple fact of restoring guidance in itself will reassure the market.

“It demonstrates that JD Sports is on top of the things you need to be a successful retailer in the 2020s, in particular being able to sell its product as readily online as it does in its shops.

“The big shift to web-based sales did bring with it extra costs, so profit dropped a lot more than revenue. However, the business has adapted creditably to an unprecedented set of circumstances.”