Shares in retailer JD Sports (JD.) leapt 10 per cent following these record results. Revenues of £2.4bn came in ahead of analysts' forecasts, leading to a remarkable 81 per cent improvement in pre-tax profits (see table). However, executive chairman Peter Cowgill admits the group's performance - like many of its rivals - will still be subject to external pressures this year, notably an inflated cost base as a result of the devaluation in sterling against currencies, including the US dollar.
That said, the company does enjoy a slight natural hedge thanks to its euro-denominated businesses, where product is sourced from the UK. But the weakening of sterling against the US dollar will cause some pressure on gross margins later this year. Management is confident it can work with suppliers to mitigate the effect, although chief financial officer Brian Small hinted at the possibility of price increases as well: "It's not a JD-specific problem," he said, "and at some point inflation will have to have an impact on the consumer". Last year gross margins nudged up from 48.5 per cent to 48.9 per cent, and Mr Small seems confident that JD's young customer base will cough up for pricier items because they're "obsessed with brands".