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JD Sports warns National Living Wage could lead to job cuts

Article By: ,  Financial Analyst
September 17, 2015 11:36 AM

Following the Chancellor George Osborne's announcement of a new compulsory National Living Wage during the summer budget, a number of business leaders have spoken out about how the increase to the minimum wage could be problematic for their organisations.

Executive chairman at JD Sports, Peter Cowgill, has recently spoken out, saying that the National Living Wage could affect jobs, even if it means consumers have more to spend.

Mr Cowgill said that even though the increase in pay rates would give customers increased spending power, this would be unlikely to outweigh the higher labour costs.

He said that the JD Sports plans to continue to recruit staff, but warns that higher wages could impact on the firm's long-term expansion and development.

"Perhaps the repercussion in the wider sense is the ongoing cost in terms of increasing employment," he explained.

The National Living Wage will be introduced in stages. The first increase will be introduced in April 2016, when workers aged 25 and over will receive a minimum of £7.20 an hour. By 2020, that rate will be raised to at least £9 per hour.

Financial results

JD Sports, which also owns footwear specialist Size? and outdoor specialists Black and Millets, has recently announced its half-year results.

The firm reported pre-tax profits for the period of £46.6 million, while like-for-like sales rose ten per cent in its core sports fashion business. This was driven by demand for branded goods.

Revenue was up 21 per cent to £810 million and the company reports that it had made progress at loss-making Blacks.

While most of the sports fashion retailer's 690 stores are in the UK, the company also says it is confident about its plans to expand into Europe – this includes opening shops in the Netherlands, Spain, France and Germany. A new flagship store was opened on London's Oxford Street in July.

On Thursday morning (September 17th), share prices dropped 1.14 per cent to 912.50.

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