Millets branches were among Blacks assets acquired by JD Sports

Millets branches were among Blacks assets acquired by JD Sports

The acquisition of failed outdoors retailer Blacks Leisure dented profits for the company that now owns it.

The Blacks section of JD Sports lost £2.2m in the three weeks between it being bought and the company’s year-end.

The loss came despite revenues of £5.9m, but JD Sports said: “The Blacks business was in a very fractured state on acquisition.

“We inherited a limited and unbalanced stock position, with a particularly severe lack of stocks in many core high-performing lines. The management team is investing a significant amount of time on developing relationships with the key brands and getting stocks flowing again.

“We attribute [the operating loss] to the lack of stock in the business and the inheritance of an excessively large and over-rented store portfolio as well as a disproportionate central cost base.”

Blacks’ new owners have closed 81 of its loss-making stores leaving 215 shops still operating.

The company said: “Ultimately, determining the size of the long term store base will depend on store performance when set against newly negotiated rents and associated property costs.”

It said the outdoor brand would continue to drain profits in the short term.

“We are also evaluating the central overheads and rationalising where appropriate. We do not expect these savings to be wholly realised until spring 2013 and so, whilst we expect a modest recovery in the second half, we now anticipate that Blacks will be earnings dilutive in the current year,” the company added.

JD Sports looks set to continue to shed staff from its Blacks stores and has allowed £3.5m for redundancies and other restructuring costs.

Overall, JD Sports, which in addition to the Blacks and Millets shops operates its eponymous stores, Champion, Chausport, Bank, Sprinter, Cecil Gee, Scotts and Size shops, saw a modest growth in its sales over the year.

Peter Cowgill, executive chairman, said: “During the period, we have invested significantly in brands, businesses and infrastructure to strengthen the platform for future development of the group.

“Despite the continued difficult trading conditions across our markets, we are pleased to report some positive results within the group, particularly from our mainland European businesses.

“While we expect some improvement in consumer confidence from the forthcoming international sporting events, we remain cautious.

“Trading in the early part of the current financial year has been satisfactory in the core UK and Ireland fascias with net like-for-like sales for the nine weeks to 31 March 2012 up 1.2 per cent.

“Margins remain under pressure as consumers continue to be offer driven.

“The group is exceptionally well positioned with its retail proposition, financial resources and management experience to take advantage of any opportunities both in the UK and internationally.

“While the board recognises that current expansion activity is likely to impact returns in the short term, it remains confident that the group is being positioned to deliver longer-term earnings growth and increasing shareholder returns.”

JD Sports made pre-tax profits of £67.4m in the year ended 28 January 2012, down 14.2 per cent on the previous year.

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