JD Sports lifts forecasts after strong sales over Christmas

JD Sports Fashion upgraded its profits forecasts yesterday as it reported strong Christmas trading despite last month's snow. But the retailer of sportswear and trainers said its next financial year would present "significant challenges" as a result of both the rise in VAT and inflationary pressures in the supply chain.

In delivering like-for-like UK sales growth of 2.5 per cent for the five weeks to 3 January, JD joined Blacks Leisure, John Lewis and Majestic Wine in toasting Christmas 2010.

In addition, Sainsbury's, the UK's third-biggest grocer, enjoyed sales growth ahead of its big rivals in the four weeks to 25 December, according to Nielsen. Marks & Spencer is also expected to unveil robust UK sales growth next week.

While Blacks benefited from consumers buying warm jackets in the cold weather, the snow did other retailers no favours, which raises questions about whether the weather is being used as an excuse for a raft of profit warnings.

The fashion group Alexon, the entertainment and book chain HMV, the greetings card specialist Clinton Cards, the upmarket jeweller Theo Fennell and the maternity wear retailer Mothercare have all warned on profits in the past month – with each company citing the snow as a factor.

Peter Cowgill, the executive chairman of JD Sports Fashion, said its performance would have been even better without the snow. But he added that consumers had been determined to buy the latest trainers and clothing at its core JD chain, as well as its Size, Bank and Scotts branches.

Mr Cowgill said: "There is a high level of demand for JD's products. We are in the right zone and are providing aspirational products to our target consumers." JD boasted pre-tax profits would exceed consensus forecasts of £75.4m for this financial year. Shares in the retailer jumped by 3.4 per cent, or 29.5p, to 895p.

While JD, unsurprisingly, benefited from strong sales of Timberland boots during the cold snap, its own brands Carbrini, McKenzie and Duffer also did "very well", Mr Cowgill said.

Underlying sales at JD, excluding its Chausport chain in France, rose by 3.1 per cent for the 48 weeks to 1 January.

Mr Cowgill warned that the rise in VAT to 20 per cent would have a bigger impact on profits than other tax rises. He said: "I think the retail market is subdued and will be going forward. The same level of takings through the till will produce lower profit margins because of it going to the Government. All the debate about a 1 per cent increase on national insurance is laughable compared to the impact of VAT."

Elsewhere, Brighthouse, the rent-to-own retailer, also enjoyed a stellar Christmas, with revenues up by 13.7 per cent to £57.4m.

Marks & Spencer updates on Tuesday and City analysts expect the high street bellwether will deliver like-for-like UK sales growth of 2 per cent for the quarter to 1 January.

While M&S probably took a hit from some of its older customers not venturing out in the icy conditions, and the latest figures will be behind the previous quarter's, Deutsche Bank is trimming its full-year profit forecasts for M&S by only 2 per cent to £705m.