JD Sports grapples with supply chain issues amid strong half-year

JD Sports announced more strong trading figures on Tuesday (10 September) with group revenue and profit for the 26 weeks to 3 August up significantly compared to the same period in 2018.

Revenue for the period totalled £2.72 billion – up from £1.85 billion in the first half of last year – and profit before tax jumped by £8 million to £129.9 million. But while sports and fashion drove this encouraging performance with a 12% revenue hike, JD revealed it is overseeing some significant changes to its outdoor division's supply chain.

JD called the half-year “another challenging period” for its outdoor businesses Blacks, Tiso, and Go Outdoors. Although improvements were reported for Blacks and Tiso, Go Outdoors recorded a significant loss.

The overall loss before tax and exceptional items within the outdoor division was £20.1 million, partly due to acquisition costs and the integration of Go Outdoors to the group platform and systems.

Looking to map out a more positive course for Go Outdoors, JD has ended the store replenishment model where branded suppliers delivered goods direct to shops. Instead, they are now served by a central warehousing model for stock, and Go Outdoors has now been migrated onto the group's IT platforms.

The group took possession of a 353,000 sq ft facility in Middlewich, Cheshire, in February, and began replenishing it and fulfilling online orders from the site. However, JD said this had “a significant impact” on availability and operations in May and June, which contributed to weak sales.

Peter Cowgill, executive chairman at the group, said: “We maintain our belief that this new flexible supply chain model, where we have greater control over the replenishment, will bring longer term financial benefits to Go Outdoors.

“Furthermore, we remain convinced that greater integration of the Outdoor businesses, with Blacks and Go Outdoors having access to one pool of stock with common merchandising systems will also provide the most robust and effective platform for the long-term development of our outdoor businesses.”

The company has delayed the transfer of Blacks stock from its central Kingsway warehouse to Middlewich until early 2020 to avoid further disruption.

The introduction of additional automation equipment at Kingsway has now been completed, with a phased opening of the new facility under way. It is expected to be fully operational ahead of this year's peak period.

A new section of the Kingsway site will offer a more bespoke packing and fulfilment service for its premium fashion businesses’ websites. Cowgill justified the move “as it further elevates the experience to our premium fashion consumers and brand partners”.

Summarising group performance, the chairman remarked: “Against a backdrop of widely reported retail challenges in the UK, it is extremely encouraging that JD has delivered like-for-like sales growth of more than 10%.

“JD also continues to gain momentum in Europe with a further double digit increase in total like-for-like sales and a net increase of 23 stores in the period. We are pleased by the continued positive trends to date in the second half in sports fashion whilst recognising the tougher comparatives ahead.”