289ACC- Accounting for Business.

JD Sports and Sports Direct Financial
Report Appraisal
289ACC. Group Assignment
Table of Contents

289ACC- Accounting for Business
1 Introduction 3
1.1 JD Sports Fashion plc 3
1.2 Sports Direct International Plc 3
2. JD Sports plc 3
2.1 Profitability Ratios 3
2.2 Liquidity 4
2.3 Efficiency 4
2.4 Gearing 5
2.5 Investment potential 5
2.2 Sports Direct plc 5
2.2.1 Profitability Ratios 5
2.2.2 Liquidity 6
2.2.3 Efficiency 6
2.2.4 Gearing 7
2.2.5 Investment Appraisal 7
3. Reappraisal of groups financial performance 8
3.1 Solvency / Gearing 8
3.2 Investor Ratios 8
3.3 Gross Profit 8
3.4 Selling, distribution and Administrative Expenses 9
3.5 Profitability 9
3.5.1 Operating profit margin 9
3.5.2 Return on Equity 9
3.5.3 Net Profit Margin 10
3.6 Liquidity 10
3.6.1 Current ratio 10
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289ACC- Accounting for Business3.6.2 Quick ratio / Acid Test Ratio 10
3.7 Efficiency in Use of the Assets 11
3.7.1 Inventory turnover 11
3.7.2 Inventory days 11
4. Recommendation for Investment 11
5. Limitations 13
Reference List 14
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289ACC- Accounting for Business1 Introduction
1.1 JD Sports Fashion plc
JD Sports is one of the leading retailers of sports, fashion and outdoor brands globally.
JD specialise in supplying high-quality products from well-known brands such as Nike,
Adidas, Puma and The North Face. Outside of the 402 stores, JD has in the UK and
Republic of Ireland they have a further 304 stores across Europe including countries
such as Spain, Germany, France, Italy etc. (JD Sports Fashion Stores By Brand 2020 |
Statista 2020) The revenue of the global sports apparel market is estimated to be
around £139.59 billion last year. (Total Revenue Of The Global Sports Apparel Market
2012-2025 | Statista 2020) Of this figure, JD had revenue totalling £4,717.8 million
which is around 3.3% of revenue in the whole market.
1.2 Sports Direct International Plc
Sports Direct is a major sports retailer founded in 1982, providing UK and European
consumers with the biggest brands at affordable prices online and in 540 stores. They
have diversified by acquiring House of Fraser in 2018 and having their premium lifestyle
group including concessions such as Flannels and Cruise in 2012, recently acquiring
Jacks wills and Game in 2019. Group revenue has increased by 10.2% from this, which
reported revenue totalled £3,957.4 FY20 which increased by 255.5 million pounds from
FY19. ( Sports Direct: sports retail revenue 2013-2020 | Statista 2020) which is around
2.8% of revenue in the whole market.
2. JD Sports plc
2.1 Profitability Ratios
Gross profit margin: JD Sports’ gross profit margin did not change between 2018 and
2019 it remained at 48%. This figure would be surprising to some as their gross profit
increased by £711.7M (an increase of 46.46%). It is likely that their gross profit margin
did not increase because their cost of sales increased at a larger rate. JD’s cost of sales
increased by 51.82% which is clearly a higher figure than the gross profit margin.
Operating profit margin: The operating profit margin decreased from 9% in 2018 to
7% in 2019. This suggests that JD has had increased operating costs which could be as
a result of the JD group acquiring Finish Line in the USA. (RETAIL Britain’S JD Sports Gets
Foot In US With $558 Million Finish Line Buy 2020)
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