JD Sports' surging profits under threat as shopping malls remain quiet

(Reuters) - Britain's biggest sportswear chain JD Sports JD.L said customer traffic was still weak in malls across Europe and cancelled its final dividend on Tuesday even as it reported a surge in profits up until the coronavirus outbreak in February.

FILE PHOTO: A JD Sports store is seen boarded up in Oxford Street, London, Britain, June 7, 2020. REUTERS/Hannah McKay

The retailer, whose shares shed almost 20% in the first half of 2020, said shoppers remain worried about visiting busy, enclosed spaces and it expected a “material” hit from the pandemic this year and more uncertainty to follow.

However, it said online sales had been strong while stores were closed and profits in the year to Feb. 1 were up by nearly a quarter on the back of a 30% jump in revenue to more than 6 billion pounds ($7.49 billion).

Shares in the company briefly rose around 2% to top London’s main index in early trade, but were flat by 0819 GMT.

“Things will look different at the interims, but JD’s position in the industry in terms of balance sheet strength is second to none... we have little doubt that JD will come out of the Covid-19 crisis in rude health,” Peel Hunt analysts said.

In February, JD Sports bought Vancouver-based Onepointfive Ventures, which consists of four stores and a website and will provide the platform to develop JD in Canada.

“Looking longer term, there is inevitably considerable uncertainty as to what the effect of COVID-19 will be on consumer behaviour and footfall,” JD Sports’ Chairman Peter Cowgill said.

The owner of Footpatrol and Cloggs said it was in negotiations with Britain’s competition watchdog, which has ordered it to sell smaller rival Footasylum, which JD bought last year.

“Unlike a lot of its peers JD Sports Fashion was one of the few retailers that had managed to set aside the weak retail outlook with a solid performance in 2019,” CMC Markets analyst Michael Hewson said.

Profit before tax and exceptional items jumped 24% to 438.8 million pounds for the year ended Feb. 1, driven by demand for its gym-style clothing.

Reporting by Tanishaa Nadkar in Bengaluru; Editing by Sherry Jacob-Phillips/Rashmi Aich/Susan Fenton