JD Sports to delay decision on paying back furlough cash despite raising profit forecast following sales boom
- The retailer expects to make ‘no less than’ £550m in pre-tax profits this year
- Delay on decision is due to rising Covid rates and uncertainty over restrictions
- On Monday, JD Sports said it spent £120m on a stake in the retailer Deporvillage
JD Sports has said it will decide later whether to pay back government Covid support despite raising its annual profit outlook following a period of high sales.
The sportswear retailer expects to make ‘no less than’ £550million in pre-tax profits this financial year compared to its previous forecast of between £475million to £500million and the £324million it made last year.
But due to the recent rise in coronavirus infection rates and the possibility of further temporary shop closures, it will defer its decision over whether to repay the furlough money it claimed from the UK Government.
Upgrade: JD Sports expects to make ‘no less than’ £550million in pre-tax profits this financial year compared to its previous forecast of between £475million to £500million
It said there would need to be greater clarity regarding the extent of lockdown restrictions, especially over its strong winter trading period, before it makes a final decision about returning furlough cash.
JD Sports’ announcement comes just a few days after it revealed it had spent £120million purchasing an 80 per cent stake in Spanish online sports company Deporvillage.
This followed purchases earlier in the year of Baltimore-based sportswear brand DTLR Villa for $495million (£355million) and a 60 per cent stake in Polish apparel retailer Marketing Investment Group.
Today meanwhile, it reported that trading has been ‘particularly encouraging’ in the UK since lockdown restrictions have eased, while most of its 3,300 stores worldwide are also now open apart from some across the Asia Pacific region.
Online demand has also risen, as have sales in the United States, which JD Sports put down to many Americans using some of the $600 they received from the $900billion US government stimulus package passed last December in their shops.
The group now has 60 stores in the country under the JD Sports name following the recent opening of five shops and the conversion of another six that formerly traded under the Finish Line brand name.
Expansion: JD Sports’ revealed this week that it had spent £120million purchasing an 80 per cent stake in Spanish online sports company Deporvillage
‘We are cognisant that the retention of sales in the period when the stores were closed, combined with the positive trading in the immediate period after reopening, did help to offset the negative financial impacts associated with the period of temporary closures,’ the firm remarked.
‘However, we must also acknowledge that the uncertainty surrounding Covid has not yet fully passed, and the current resurgence in infection rates is affecting our core customer demographic more than was the case previously.’
JD Sports did confirm today, though, that it plans to split Peter Cowgill’s role of executive chairman and chief executive before the next annual general meeting and will start a ‘comprehensive process’ shortly.
Criticism: AJ Bell’s Russ Mould said JD Sports ‘should really use money from online operations to support disruption to its store estate, not rely on Government hand-me-downs’
It said it accepts that the make-up of the group’s board should ‘reflect the current scale, momentum and global positioning’ of the firm and its higher stock market valuation.
AJ Bell investment director Russ Mould described JD Sports’ refusal to return furlough money in spite of its high profit forecast as ‘disgraceful.’
He added: ‘It’s even more of an insult that it is still biding its time to make a firm decision or not whether to give back the money.
‘This is an incredibly successful business which is making significant amounts of money. The furlough scheme was put in place to support companies during dark times, but JD Sports is one of many businesses which have thrived with online sales during the pandemic.
‘Therefore, it should really use money from online operations to support disruption to its store estate, not rely on Government hand-me-downs. Shareholders should be pushing for the company to pull up its socks and give that money back.’
Shares in JD Sports were up by 2.8 per cent to 944.4p during the late morning today.