When Mike Ashley threatened in 2011 that he'd "finish off" JD Sports, the response from Peter Cowgill, the boss of his smaller rival, was brief and unruffled. "We smile and carry on," he said.
That was almost a decade ago, and carry on JD certainly has, in fine style. Still run by Cowgill, the sportswear group yesterday defied the widespread gloom on the high street to report a 15 per cent jump in full year profits to £340 million (€393 million). Sales for the year were up just short of 50 per cent to £4.7 billion.
JD shares celebrated by rising to a new all-time peak of 570p. At this level, the group is valued at £5.5 billion, more than many high street stalwarts, including Sainsbury’s, at £5.2 billion, and Marks & Spencer, at £4.5 billion.
More to the point, it’s more than three times the market capitalisation of its would-be nemesis, Sports Direct, which the City values at £1.6 billion.
The rise in the JD price puts the sports fashion group in serious contention to gain entry to the prestigious FTSE 100 index in the next quarterly reshuffle, perhaps at the expense of M&S.
Elevation to the blue chip index would certainly be a sweet moment for Cowgill, not least because Sports Direct used to have a coveted place in the index itself before being booted out three years ago.
How has JD thrived while Sports Direct continues to struggle? Cowgill made the point yesterday that while JD is not immune to the struggles of the retail sector, it remained aloof from the widespread discounting seen over the Christmas period and which played such havoc with retailers’ margins.
In part it's because JD and Sports Direct serve different customer bases – JD is big in the growing, higher-margin fashion end of the sportswear market, or "athleisure" as it's known. In other words, gear that's worn to work or the pub but rarely sees the inside of a gym. Its ranges include exclusive products from the leading brands such as Nike and Adidas.
JD has also benefitted from its growing overseas presence, as well as its online operation. There’s probably also an element of capitalising on its rival’s woes.
Sports Direct's other distractions – Debenhams, House of Fraser etc – have taken up an increasing amount of Ashley's time and resources and JD will have taken full advantage of that.
Cowgill has been pursuing his own expansion plans, rather more successfully than Ashley. Last year it made a big move into the US, paying £400 million for the Finish Line sportswear chain.
Finish Line added almost £1 billion to sales and £27 million to profits in its first six months as part of JD and Cowgill has ambitious plans for growth across the Atlantic.
America has proven to be a graveyard for many leading British retailers over the years, from Tesco to Dixons and M&S, and news of expansion across the Atlantic tends to unsettle the City's retail sector followers. It's early days for JD but, so far, the signs are good.
COULD DOWNTURNS BE A NUMBERS GAME?
If government statisticians had monitored VAT returns 10 years ago, they would have spotted the start of the 2008/09 recession a full five months before it became apparent in official figures.
That was the impetus for a new “big data” index launched by the Office for National Statistics (ONS) this week, with the aim of providing an early warning system for signs of stress in the economy.
Government number-crunchers are now sifting through novel new data sources – along with VAT returns, they are monitoring road traffic data for lorries, gleaned from road sensors around ports and other roads, in an effort to track international trade.
Other sources in the future could include movements of ships, warehouse and manufacturing site traffic, counting skips and cranes, online job vacancies, mobile phone usage, tracking commuter journeys through mobile data, and using satellite images to estimate populations.
The ONS, which has long been criticised for failings in its figures, stressed that the new index is not intended to predict gross domestic product but more to provide supplementary data ahead of official figures.
First results of the new index showed no big shift in the economy but there was a very slight weakening over the first quarter, with more companies reporting a decline in turnover over the period, the ONS said. Lorry traffic, however, was “broadly stable”.
At least when the next recession arrives, we’ll see it coming a little sooner.
- Fiona Walsh is business editor of theguardian.com
