JD Sports boss Peter Cowgill ‘questions’ National Insurance and corporation tax hikes

JD sports (PA Archives)

JD Sports boss Peter Cowgill has joined the chorus of politicians and business leaders urging Chancellor Rishi Sunak to rethink impending tax hikes.

Cowgill told The Standard: ‘The tax on business this year, at a time when you have so much wage inflation anyway, is quite steep. You have the national insurance tax and you also have the corporate tax increase. This has an impact on retained earnings for investment.

“I would definitely question it, absolutely”

National Insurance, a tax paid on employees’ wages, is expected to rise by 1.25 percentage points from April. Corporate tax should rise from 19% to 25% at the same time.

The tax increases were announced last year as part of efforts to claw back some of the billions spent to support the country during the pandemic, but a growing coalition of business leaders, politicians, economists and of experts said that this may not be the right time. There are fears the changes could derail the UK’s economic recovery.

Cowgill said JD is already seeing “definite wage inflation” due to labor shortages and rising living wages. Tax hikes would put more pressure on businesses like his.

Cowgill’s comments came as JD Sports updated its profit forecast for the year after a strong Christmas.

The sportswear and footwear retailer said annual profits are now expected to be at least £875m, ahead of current market expectations which average £810m.

Sales in the 22 weeks to Jan. 1 were up 10% from 2020, which JD said was “extremely robust.” The company saw an “equally positive performance throughout Black Friday and the Christmas period”.

Cowgill said: “We are very pleased that Christmas has held up as it has all year.”

The strong sales over the 22-week period were partly due to an estimated £100million increase in US stimulus last year. Millions of stimulus checks have been sent to Americans to encourage them to increase their spending.

Going forward, JD faces “challenges” such as stock shortages of certain brands, global Covid restrictions and wage inflation, but the company said it was “well positioned to to manage”. Earnings for the year to January 2023 are now expected to be in line with the current year, putting them ahead of market expectations.

Cowgill said: “Across all supply chains there are challenges due to Far East sourcing, blockages and catch-ups. Global brands are no different from others in this regard.

“It won’t be completely better until the second half of the year.”

Last year, JD Sports lost its long-standing bid to buy Footasylum after being blocked by the regulator. Cowgill declined to comment on reports that his rival Mike Ashley, the founder of Sports Direct, is now touring the channel.

Amisha Chohan, head of small cap strategy at Quilter Cheviot, said: “JD Sports is in a prime position to capitalize on demand for athleisure, and released a positive trading statement this morning. Management’s outlook for the fiscal year 2023 have been revised upwards but remain cautious in our view.

“Many retailers are still suffering from the same fragile financial structures they had before the pandemic and will come under intense pressure. JD Sports, however, is a high-quality company well positioned to consolidate the market and with solid management experience and “trusted partner” relationships with high-end brands such as Nike and Adidas. The path to future growth remains clear for JD Sports.

“Furthermore, in an environment of mounting inflationary pressures, JD Sports benefits from strong pricing power and a younger consumer base.”

Luisa D. Fuller