It seems a day cannot pass without a breaking news story of a well-known high-street retailer steeped in tradition and a mainstay of the British high street now on the brink of collapse and scrambling for rescue deals and bailouts.
Mothercare, Toys R Us, Maplin, Poundworld to name a few, these have all fallen foul of the recent changing of the guard as shoppers flock for their plethora of digital devices and shop from the comfort of their own homes rather than brave the high street. Somebody should let JD Sports Fashion (LSE: JD) know what’s happening out there because it is very much bucking the trend.
Increasing costs & change of spending habits
Research indicates the top 150 UK retailers have 20% more store space than they need and can afford. Some shops such as Homebase, Mothercare, Carpetright and New Look have done restructuring deals with their landlords, closing hundreds of shops between them.
Companies have had to deal with rising costs: researchers at A&M and Retail Economics suggest that during the past five years, companies have had to spend 10.8% more on things such as business rates, increasing wages and rents. And, at the same time, retailers are trying to adapt to rapidly changing shopping habits. Consumers now spend one in every five pounds online – and if businesses are seeing 20% fewer sales on the shop floor as well as their fixed costs rising, then profit margins will be squeezed.
Consumers are still shopping, of course. But even with the rise of online platforms, shops need people to walk through the door.
Humble beginnings & a meteoric rise
A sole store opened in 1981 in the former mill town of Bury. Fast forward 38 years, and there are 2,400 stores in 19 countries, numerous acquisitions (which means JD Group now boasts a portfolio of sport, outdoor and fashion amongst its offerings), not to mention a recent foray into the gym market. In 2019 JD Sports was impressively promoted to the FTSE 100 list of largest businesses in the UK.
JD Sports: a growth phenomenon
In the last five years, JD Sports has seen an astounding 800% increase in its share prices, which on the surface of things is quite remarkable. If you take into account revenue and profit increasing year on year despite the acquisitions and forays into new markets, JD Sports’ moniker of “undisputed king of trainers” should probably be changed to “undisputed king of retail”.
No one is under the impression that the next five years will mean another 800% increase in share prices as well as further expansion into new markets, but the company must be applauded for its savvy and methodical rise atop a retail minefield.
