JD Sports: Cowgill’s exit will be a fitness test in a consumer slowdown

The great resignation is not limited to the rank and file. A record number of chief executives are expected to go this year. But some departures come as a surprise to investors. One such was the sudden exit in May of Peter Cowgill, who led the JD Sports retail group as executive chair for 18 years. But the warning signs were there.

Tensions over management roles at the FTSE 100 group have been rising for some time. Cowgill built an empire dubbed the “King of Trainers” and had ruled over the executive and oversight teams since 2004. Already under pressure to separate the roles, revelations of a meeting with Footasylum boss Barry Bown heightened governance concerns last November. A sharp decline in the share price signalled that shareholders wanted change.

Cowgill joined the business as finance director in 1996 and forged exclusive deals with big trainer makers Nike and Adidas to keep JD ahead of peers. JD’s market value soared from £100mn then to a peak of more than £11bn last year.

Since then, shares have fallen by half. Trading at 10 times next year’s expected earnings, the valuation is also half of its average over the past five years. The delay of annual results in February this year compounded concerns about governance. Investors have also long expressed discontent about its pay practices.

Retailers face a growing threat from Nike and Adidas, which make bigger profits from direct distribution. Worries about a slowdown in consumer spending are another concern. Cowgill, who managed to increase earnings during the financial crisis, might be missed in a slowdown. JD’s 19 per cent CAGR in earnings per share is twice that of Nike since 2009.

Analysts are still pricing in record earnings per share for JD over the coming 12 months. Achieving it will be tough in a recession. A resistance to change may have made Cowgill’s exit inevitable. But his successor will still need size 12 feet to fill the void he leaves behind.