Watchdog extends JD Sports probe as Next ‘defies gravity’
Fashion play: watchdogs want more information
Competition watchdogs have called for further investigation into the proposed merger of JD Sports and FootAsylum.
The Competition and Markets Authority said it may result in a substantial lessening of competition.
Peter Cowgill, executive ehairman of JD Sports Fashion, said: “We continue to believe that Footasylum would be a positive addition to the group, bringing a differentiated customer demographic and fashion-led product range that is complementary to our existing business.
“We also believe that there will be significant operational and strategic benefits from a combination of the two businesses.
“Our discussions with the CMA are ongoing as we consider whether to proceed to Phase 2 or if acceptable remedies can be agreed at this stage. We look forward to working constructively with the CMA in this regard and will provide further updates in due course.”
Next ‘defies gravity’
Full price sales were up 4.3% and pre-tax profit rose 2.7% to £319.6m.
The company said it was maintaining its guidance for the full year, It declared an ordinary interim dividend of 57.5p per share, up 4.5% on last year.
Ed Monk, associate director from Fidelity Personal Investing’s share dealing service said: “Next appears to be defying gravity in the troubled retail sector.
“Profit guidance was raised in July and that has been borne out today in interims showing the fashion chain grew full price sales by 4.3% compared to the same point last year, with profit up 2.7% and earnings per share up 7.5%. A healthy dividend increase is the reward for investors.
“Not only are headline numbers improving, but they are doing so with the help of bricks-and-mortar Next stores, which are proving more resilient than many predicted. Although online is clearly where Next is moving, and having to compete with its own lines with non-brand clothes, its physical stores complement the online arm by offering shoppers somewhere to click and collect, or return unwanted items.
“Next shares have been among the strongest performers this year, adding around 46% so far in 2019. That has taken valuations out of bargain basement territory and the shares now trade around 14 times price-to-earnings, close to their long-run level.”
After ONS figures showed retail sales fell by 0.2% in August, Next CEO Lord Wolfson was dismissive of claims that Brexit was keeping shoppers from the high street.
“It is very hard to determine whether the uncertainty over Brexit is having any effect on consumer spending and we can find no evidence that it is affecting spending on small ticket price items.
“Some suggest that the fact of Brexit, of itself, might undermine consumer confidence.
“Certainly, the first few weeks of the Autumn season have been disappointing. However, we believe that the warm start to September has done much more to hinder sales than the political temperature.
Our experience is that political storms, of themselves, rarely affect sales and consumers only change their behaviour when those events directly impair their income or increase their non-discretionary expenditure.
“Our view is that Brexit will only materially affect consumer spending in the event that it triggers inflationary pressure on prices or logistical problems at our ports.”