RETAILER JD Sports Fashion has posted a 26% rise in annual profits – but warned of increasing challenges ahead.

JD said pre-tax profits before one-off items rose to £67.4m in the year to January 30 from £53.6m for the previous 12 months.

The firm said it had proved resilient “in the face of less than favourable economic conditions and exchange rates.”

Like-for-like sales rose by 2.5% during the period.

Although same-store sales slowed to 2% in the 10 weeks to April 10, the firm said margins in its fashion business had improved and current trading in the UK and Ireland was encouraging.

JD’s sports division lifted total revenue by 10% to £615.5m in the year, while like-for-like sales grew by 2.3%.

JD said it was particularly pleased with improved margins in the division, which helped lift operating profits to £64.1m before exceptionals.

It attributed its success to stock management, the strength of its own brands and “competitor failures and weaknesses”.

JD has stood out among its struggling rivals in the economic downturn, partly due to its focus on fashion rather than dependence on replica football kit sales.