JDSports struggles with Exports

We often hear that Brexit is causing massive problems for SMEs (small and medium-sized businesses). But this update from JDSports is an insight into the problems which Brexit is creating for larger businesses too: temporarily leasing 115,000 sq ft in Lille for online fulfilment; longer term taking 620,000 ft for a regional distribution centre in Heerlen in Netherlands (close to borders with Germany & Belgium); Dublin warehouse operating soon. How many businesses simply could not handle this type of disruption?

JD Sports deliveries to Western Europe (including the Republic of Ireland)

The terms of the UK's trading agreement with the European Union mean that we no longer enjoy tariff-free frictionless trading with our former European partners. As a consequence, we are now incurring some duties on the transfer of goods from the UK into EU countries. There is also a significantly enhanced administrative burden, and whilst our operational systems have been configured to sort stocks as required by the Customs Authorities and to produce the necessary documentation in the right format, this does not guarantee that goods flow freely into the EU, with an unexpectedly high proportion of trailers stopped at the border for detailed manual checking. This can add several days onto delivery timelines, but until a particular trailer is pulled for inspection, we do not know which particular deliveries will be impacted.

We have been able to reduce our exposure to the adverse consequences of Brexit through our 80,000 sq.ft. third party warehouse in Southern Belgium, which opened in Autumn 2020 and is functioning very effectively. This site is already receiving stocks and fulfilling a large proportion of the core ranges and fastest moving lines required for stores in mainland Europe. However, it does not provide a solution for online orders.

Therefore, to complement this facility in southern Belgium, we have now signed a short-term lease on a 115,000 sq.ft. facility located in Lille, northern France, which will be dedicated to processing online orders for a number of countries across mainland Europe, The fit-out of this site and installation of Group systems has now commenced, with customer orders beginning to be fulfilled from this site ahead of the peak trading period.

As our business in Western Europe increases in scale and complexity, we are looking to build a cost effective, service-orientated supply network which can support business growth both in stores and online. The first stage of this is a large, permanent facility which will have the capacity to process substantially all of the volume required for our stores in Western Europe.

In this regard we are currently finalising legal contracts for the lease of a 620,000 sq.ft. facility in Heerlen, South East Netherlands. Construction of this facility has now commenced with the site scheduled to be handed over in the second half of 2022 for initial fitting out. We would hope to begin fulfilling from this site on a small-scale manual basis in the second half of 2023, although the current long lead-times on warehouse automation equipment means that it will likely be mid-2024 before a more automated solution is available and it is fully operational. We currently estimate that capital expenditure of approximately £100 million will be incurred before Summer 2024 to bring the site into full operational use, with the majority of this spend being incurred in the period between Summer 2022 and Summer 2024.

Longer term, this facility will likely be complemented by smaller regional hubs near major urban areas to further enhance the service and delivery options to consumers.

Elsewhere, our new 65,000 sq.ft. warehouse near Dublin will begin receiving stock from suppliers shortly, which will facilitate the supply of product to stores and fulfilment of online orders in the Republic of Ireland ahead of the peak trading period.

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