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Despite Brexit and High Street Struggles, JD Sports Reports Healthy First Half

As High Street continues to grapple with Brexit uncertainty, JD Sports has turned in an encouraging first half that the retailer said puts it in a good position to weather future trade complications in Europe.

Following the acquisition of Footasylum in February and its merger with Finish Line in the United States in 2018, JD Sports reported group profit up nearly 47 percent in the first half at 2.72 billion pounds ($3.35 billion), representing sales for the 26 weeks ending Aug. 3. Even more of a standout, however, were the retailer’s like-for-like sales, which grew by 12 percent globally and by 10 percent for its core U.K. and Ireland business. The group also reported record profit of 235.2 million pounds ($290.01 million).

“Against a backdrop of widely reported retail challenges in the U.K., it is extremely encouraging that JD has delivered like-for-like sales growth of more than 10 percent with an improved conversion reflecting consumers’ increasingly positive reaction to our elevated multichannel proposition where a unique and constantly evolving sports and fashion premium brand offer is presented in a vibrant retail theatre with innovative digital technology,” Peter Cowgill, JD Sports’ executive chairman, said in a statement. “We ensure that the JD proposition retains its dynamic appeal and forges deeper connection with its consumers through the continual investment in our physical store portfolio, digital platforms and creative marketing.”

The elephant in the room is, of course, Brexit and—although JD Sports has thus far managed to mitigate its impact on sales—the group’s plans for the geopolitical breakup loomed large in its explanation of what investors can expect in the back half of the year and going forward.

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“We recognize that there is heightened uncertainty surrounding the nature of the U.K.’s exit from the European Union and we are very cognizant of the increased risk of a disorderly exit which could have potential adverse consequences on supply chains, tariffs, exchange rates and consumer demand,” Cowgill explained.

The group explained that it has expected for some time it would need to obtain a European warehouse by 2021 to contend with the risks inherent with the Brexit decision. Cowgill said his team is also working with logistics partners to obtain an additional 80,000 square feet of warehouse space in Belgium that they believe would give the retailer the capacity to fulfill footwear launches in Europe for its key brands.

JD Sports expects this additional facility to be ready in early 2020.

“The Group currently operates with a highly integrated stock management infrastructure for its stores across Europe where the stock requirement for the JD stores outside of the U.K. is aggregated with that of the U.K. stores with one consolidated order then sent to the supplier,” the group added in an accompanying statement. “All stocks are then delivered to the Group’s primary Kingsway warehouse for onward fulfillment both to stores and to online customers.”

JD Sports has also made a concerted effort to grow its international presence and diversify its interests in recent quarters. The group logged a net increase of 23 new JD stores across mainland Europe and gained seven stores in the Asia Pacific region over the same period. In the United States, its convergence with Finish Line and the addition of six physical JD locations has been bolstered with an e-commerce website.

“We continue to make learnings in all of our territories which we use to further refine our integrated digital proposition and, with the ongoing support of our key brand partners, we remain confident that further opportunities will prevail to expand the reach of our exciting and dynamic proposition in the region,” Cowgill said.