(Reuters) - JD Sports Fashion (JD.L) said one-off losses at Blacks would push full-year group profit to the low end of expectations and the outdoor clothing retailer would break even later than previously expected.
The British retail group, which bought Blacks from administrators in January 2012, forecast losses of 4-5 million pounds for Blacks in the second half of the year, down from a 10 million pound loss in the first half.
Those one-off losses at the outdoor unit would result in group annual profit before tax and exceptional items at the lower end of market expectations, currently 60 million pounds, JD Sports said on Thursday.
That implies losses from the outdoor division were more significant than expected, Seymour Pierce analyst Freddie George wrote in a research note.
Chairman Peter Cowgill said he now expected break-even at Blacks only by the second half of next year, rather than September’s estimate of the second half of this year.
Cowgill said the forecast had been revised since recent changes in the division’s management team.
“If you were talking to me this time next year, I’d be disappointed if we hadn’t broken even in that back half (H2),” Cowgill said.
As part of the turnaround strategy for Blacks, which sells outdoor goods from brands including North Face and Berghaus, the group is reviewing the positioning, size and number of stores.
“It’s a rationalisation rather than purely a curtailment. There are very few closures on the cards at the moment but it’s under constant review,” Cowgill said.
British retailers have been battling inflation, subdued wages growth and government austerity measures leading to tightened household budgets, with camera specialist Jessops the latest casualty after calling in the administrators on Wednesday.
While seasonally-sensitive Blacks stores also suffered as mild weather over Christmas discouraged customers from buying thick outdoor jackets, the “engine room” of JD Sports’ business, its UK and Ireland JD Sports stores - saw sales rise 3.2 percent rise in the seven weeks to January 5.
After 49 weeks, cumulative like-for-like sales rose 2.4 percent, it said, adding that the margin had improved and was near to last year’s level in the year to date.
“No mean feat, given the level of discounting in the marketplace,” N+1 Singer analysts wrote in a research note.
Shares rose 0.7 percent by 1056 GMT.
“We believe this represents a very robust outcome given the tough operating environment and highlights the ongoing strength and resilience of the core business,” N+1 Singer said.
The group’s smaller fashion business - which trades under the store names Bank and Scotts and accounts for about 10 percent of its business - saw sales fall 7.9 percent in the seven-week period and 3.9 percent over 49 weeks.
“(We are) now very focused on improving the performance in this business,” the company said in a statement on Thursday.
($1 = 0.6247 British pounds)
Reporting by Helen Massy-Beresford; Editing by Sophie Walker