JD Sports has blamed an 18.3% drop in pre-tax profits for the 53 weeks to 2 February 2013 on legacy issues related to the administration of Blacks Leisure.
While the sports retailer declared pre-tax profits of £55.1 million, the embattled outdoor division was a massive drain, accounting for a loss before exceptionals of £14.9 million – an increase on the £2.2 million loss declared for the same period in 2012.
Peter Cowgill, executive chairman of JD Sports Fashion, confirmed that its outdoor division had continued to suffer a difficult trading period.
He explained: “On our acquisition of the business from administration in January 2012 we inherited a very limited and unbalanced stock position, with a particularly severe lack of stocks in many core high performing lines combined with an excessively large and over-rented store portfolio and a disproportionate central cost base.
“Our first priorities in turning around the business were to deal with these issues. Agreeing and receiving a resumption of supply from key suppliers was a difficult and time consuming process. Consequently, it was three months before we started to receive any substantial deliveries of new stocks. During this period, the business made very substantial losses.”
Cowgill said that, at acquisition, the company had initially backed the incumbent management team, who came together in Autumn 2011, and gave them the opportunity to turn the business round.
However, the directors at JD felt that that they did not have sufficient experience or knowledge of the outdoor market to take the business forward.
Cowgill explained: “This was reflected in the proposition which they bought into for the key Autumn and Winter seasons which required significant margin sacrifice to clear through. We now have a new management team which includes both external recruits and long serving members of the Group’s team.
“We will not see its full impact until later in the year but we believe that we now have the right team and strategy to take the business forward.”
KPMG was the practitioner firm that handled the administration of Blacks Leisure.