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JD Sports hamstrung by Go Outdoors

The sports fashion retailer recorded exceptional charges linked to its embattled outdoors brand
JD Sports hamstrung by Go Outdoors

Given their timeframe, JD Sports Fashion’s (JD.) full-year results figures don’t capture the impact of the coronavirus and associated store closures. The sports fashion retailer delayed the release of its results in April in order to provide investors with more clarity on the consequences of the pandemic. It has warned that customers have proved nervous about re-entering stores following the relaxation of the lockdown. 

IC TIP: Sell at 668p

A different virus has taken hold within the company. JD Sports recorded £90.3m in exceptional charges, much of which pertained to its ailing Go Outdoors brand. Acquired in 2016 for £112m, Go Outdoors’ pre-tax losses grew to £23.8m and drove JD’s outdoor segment into an overall loss for the year. Go Outdoors has been moved to a central warehouse model and closed its Sheffield head office; moves that both proved more disruptive than anticipated. JD appointed administrators to the brand on 23 June before subsequently reacquiring it for £56.5m. The group says it is renegotiating Go Outdoors’ lease terms with landlords, which currently average 10 years in length with upwards-only rent reviews – not ideal given the outlook for retail property.

JD has written down goodwill linked to its acquisition to the tune of £42.5m, with a further £7.2m exceptional charge taken in connection with the integration of its IT systems and infrastructure. The group also separately registered a £31.3m charge linked to the movement of put and call options.

The group provided a brief update on its Footasylum business, which, in May, the Competition and Markets Authority ruled it must sell. JD is appealing the decision and is concurrently consulting with the watchdog over the divestment process.

Available cash ballooned from £125m to £430m, which sits at the high point of its working capital cycle, but the extent of the lease liabilities will be the focus for retail analysts given the seemingly slow return of footfall.

Broker Peel Hunt forecasts adjusted pre-tax profits and EPS of £182m and 14.8p, respectively, for February 2021, rising to £380m and 30.8p in FY2022.

JD SPORTS FASHION (JD.)  
ORD PRICE:668pMARKET VALUE:£ 6.5bn
TOUCH:668-672p12-MONTH HIGH:890pLOW: 275p
DIVIDEND YIELD:0.04%PE RATIO:26
NET ASSET VALUE:125p*NET DEBT:£2.03bn**
Year to 01 FebTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20161.8213210.01.48
20172.3823818.41.55
20183.1629523.81.63
20194.7234026.91.71
20206.1134925.30.28
% change+30+3-6-84
Ex-div:na   
Payment:na   
*Includes intangible assets of £414m, or 43p a share. **Includes lease liabilities of £1.99bn.