By Muvija M and Arathy S Nair
(Reuters) – Britain’s JD Sports <JD.L> promised on Tuesday to back up its purchase of U.S. chain Finish Line by investing 200 million pounds over the next five years after overseas growth helped fuel a 19 percent rise in first-half earnings.
The company, now Britain’s biggest sportswear retailer with about 1,500 outlets in 16 countries, could bring forward plans for a continental European warehouse due to Brexit, Chief Financial Officer Brian Small said.
Revenue rose 35 percent in the half year to Aug. 4 at the chain, which has benefited from the global trend towards “athleisure” – or wearing sportswear while not playing sport.
It said second half sales looked to be continuing in the same vein.
“Against a backdrop of widely reported retail challenges in the UK, it is extremely reassuring that the profitability in the UK and Ireland Sports Fascias has been further enhanced,” the company said in the half-year report.
JD Sports has been looking abroad to boost profit for some time, calling its home market saturated.
It has opened 39 new stores in international markets this year and in March paid $558 million for U.S.-chain Finish Line – a big bet that it can replicate a model based on tight relationships with Nike and Adidas that has helped its shares outperform those of rivals Foot Locker <FL.N> and Sports Direct <SPD.L> in the past three years.
Chairman Peter Cowgill told the Financial Times this year that he lost sleep after buying the U.S. business – by far the company’s biggest deal since it was founded as a small high street store in the north English town of Bury in 1981.
“The Finish Line has historically under-invested in its stores and because of that, they have not had the same access to products,” Small told Reuters in a telephone interview.
“We believe that our approach to retailing means that we can improve the results of the Finish Line stores by introducing more concentration on the detail of the business and better visual merchandising standards.”
The company will open five new stores, branded as JD Sports, in the second half of the year in the United States, Small said, adding that it would look to grow in Asia Pacific, Europe and U.S.
Hargreaves Lansdown analyst Laith Khalaf said the retailer was now knocking on the door of the FTSE 100 index of leading stocks, as its 4.7 billion pound market capitalisation matched that of venerable retailer Marks & Spencer <MKS.L> .
JD Sports said it would look to make changes to its IT systems to tackle more administration and documentation that is likely to arise when Britain leaves the EU next March.
“It has always been our plan to have a warehouse actually located in mainland Europe, some time early in the next decade, and I think that Brexit may bring forward the date that is desirable,” Small told Reuters.
Finish Line contributed revenue of 180 million pounds and a profit before tax of 3.5 million pounds to the first half results.
Shares of the company were up about 1.5 percent at 494.5 pence by 1030 GMT.
(Reporting by Arathy S Nair and Muvija M in Bengaluru; Editing by Patrick Graham/Keith Weir)