- JD Sports has downgraded earnings guidance, meaning it could miss a target for the second year in a row to achieve £1 billion profit
- Next could hit £1 billion pre-tax profit when it reports next set of full-year results
- Tesco is the only UK quoted retailer currently in the £1 billion club
- Primark also makes more than £1 billion profit, albeit investors can only buy shares in its parent, the food to fashion conglomerate Associated British Foods
- Marks & Spencer and Kingfisher previously hit the £1 billion profit level but are no longer members of the club
- Sainsbury’s could eventually join the club, although not for a while
“JD Sports’ goal of scoring £1 billion in annual profits has been kicked down the road for the second year in a row,” says Dan Coatsworth, investment analyst at AJ Bell.
“It was previously hoping to join the club of UK-quoted retailers with this accolade and get its membership badge at its next set of full-year earnings, putting itself alongside a high street elite that has at different points included Tesco, Marks & Spencer and B&Q-owner Kingfisher.
“However, a disappointing trading update has led JD Sports to lower earnings expectations, suggesting it will miss the target once again. That leaves Next as the only real contender to join the £1 billion profit club in the near term. Even then, there is still a chance that Next misses the target as well, judging by analyst forecasts.
“Some may view this £1 billion figure as merely symbolic, but breaching this barrier is no mean feat and demonstrates a retailer has a lasting place in consumers’ affections and the scale to win in a competitive marketplace.”
JD Sports’ hopes are dashed for the £1 billion club
“JD Sports Fashion previously guided for pre-tax profit of between £955 million and £1.035 billion for the year to 3 February 2025. It’s now published a third quarter update and guided for full-year profit to be at the lower end of this range.
“Analysts had already taken a cautious view, with the consensus forecast standing at £965 million. That figure is likely to be revised downwards as a result of the trading update.
“Theoretically, a decent run over the Black Friday period and leading into Christmas could still help it get over the £1 billion line, but that is not a given.
“JD Sports previously hoped to exceed £1 billion pre-tax profit for the year to February 2024, but it tripped up at the last hurdle and missed the target. Admittedly, the end of that trading period was soured by widespread discounts in the athleisure market due to consumers being more wary of splashing the cash.
“Missing the target once can be excused; falling short for a second time in a row would certainly be more embarrassing for chief executive Régis Schultz. Though even if JD Sports does fall short of the £1 billion target again, there is no denying it is one of the biggest retail success stories of the past decade.”
Analyst forecasts throw doubt on Next joining the £1 billion club at its next results
“Fashion retailer Next recently upgraded its full-year (to 31 January 2025) pre-tax profit forecast from £995 million to £1.005 billion after a strong third quarter. Getting into the £1 billion club still remains touch and go. The consensus forecast is ‘only’ £996.5 million which suggests that some analysts think it could fall short by a whisker.
“Next has become a role model for other retailers. It has shown that physical stores remain relevant in the modern world despite the convenience of online shopping. While its clothes may not win awards for their cutting-edge fashion, shoppers can depend on Next for good quality, smart-looking clothes and that reputation has kept it on top for decades.
“Adding third party brands onto its platform has broadened the choice for shoppers. This helps to prevent a lot of people from going elsewhere to buy clothes. It also provides a nice kicker for earnings if Next handles the logistics of getting the third-party product to the buyer and handling returns.
“Marks & Spencer is now giving Next a good run for its money, having finally upped its game on the clothing side. However, Next is never one to sit back and let someone else eat its lunch.”
Who else has made more than £1 billion?
“Tesco exceeded the £1 billion level in 2001, then went on an aggressive overseas expansion strategy in Europe, Asia and the US which ultimately blew up and was dismantled after the supermarket made a £6 billion loss in 2015 including impairment charges. Thankfully for shareholders, Tesco’s earnings have continued to grow in the intervening years and pre-tax profits closed in on £2.3 billion for the year to February 2024.
“Marks & Spencer has breached the £1 billion barrier on three occasions, in 1997, 1998 and 2008, but has struggled to stay in the club. It is forecast to make £820.7 million in the year to March 2025, £882.5 million in 2026 and £946.3 million in 2027. It’s headed in the right direction but reclaiming its £1 billion membership badge looks unlikely in the near term.
“Kingfisher became the third quoted UK retailer to surpass the £1 billion profit mark when the Covid-era home improvement boom persisted into the year to January 2022, driving statutory pre-tax profits up by a third to a smidge over £1 billion. Unfortunately, earnings have subsequently faded amid waning DIY demand and soft market conditions in France. Kingfisher is expected to report pre-tax profit of £534 million in the year to January 2025, so it has a long way to go to get back on top.
“Associated British Foods is a retail and food conglomerate and its results break down the contribution from individual parts of its business, albeit at the operating profit level rather than pre-tax profit level. The latter accounts for a company’s interest costs on any debt as well as operating profit. Associated British Foods owns retailer Primark which made £1.1 billion adjusted operating profit in the year to September 2024, up from £735 million a year earlier.”
Future £1 billion club candidates
“Sainsbury’s is approaching the three-quarter mark towards the £1 billion target. It is expected to report £704 million pre-tax profit in the year to March 2025, rising to £844 million two years later. The grocery sector isn’t rapid growth, so Sainsbury’s might not be a fast-track candidate for the £1 billion club.
“Frasers is further behind, despite being an ambitious and successful retailer. It is expected to generate £588.9 million pre-tax profit in the year to April 2025, rising to £639 million in 2027.
“Equally, B&M is a well-known name on the retail scene but the profits are mid-tier rather than top-ranked. It is forecast to make approximately £500 million pre-tax profit in the year to March 2025.
“WH Smith and Dunelm are nowhere close, and it could be decades before Currys and Pets at Home have a shot at joining the £1 billion club, if at all.”
Notes:
Next is scheduled to report its fourth quarter trading update on 7 January 2025 and full-year results on 27 March 2025.
JD Sports is scheduled to report its fourth quarter trading update on 14 January 2025. Full-year results will be published in May 2025.
