ii view: JD Sports Fashion jogs higher after record profit

Shares for this global retailer are down around 50% year-to-date. We assess prospects.

Full-year results to 29 January

• Revenue up 39% to £8.55 billion
• Profit before tax and exceptional items up 125% to £947 million
• Net cash held up 49% to £1.19 billion
• Final dividend up 20% to 0.35p per share

Interim chair Helen Ashton said:

"This result demonstrates our capacity for growth in both existing and new markets, and the strength of our global proposition and consumer engagement in store and online. The process to recruit a CEO is ongoing with a number of high calibre candidates at different stages of consideration including some who have only recently made their interest in the role known.

"Whilst we are encouraged by the resilient nature of the consumer demand in the current year to date, we remain conscious of the headwinds that prevail at this time including the general global macro-economic and geopolitical situation.”

ii round-up:

Global sports-fashion retailer JD Sports Fashion (LSE:JD.) today delivered record profits in line with analyst expectations.

Pre-tax profit more than doubled to £947 million year-over-year. Profit for its expanded North American business doubled, while digital sales helped push a strong performance for its home UK & Irish business.

JD Sports shares rose by more than 4% in UK trading having come into this latest update down by more than 50% year-to-date. Shares for online retailer Boohoo Group (LSE:BOO) are down by a similar amount during 2022, while shares for high street icon Marks & Spencer (LSE:MKS) have fallen by around 40%. The FTSE All World index is down around a fifth. 

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JD Sports’ Outdoor business also returned to profit during the year. Group net cash increased to over £1 billion while the final dividend payment was hiked by a fifth to 0.35p per share. 

Accompanying management outlook comments also offer some reassurance, with profit for the year ahead expected to match this year’s record performance. That again broadly equalled current City estimates. 

The FTSE 100 retailer’s hunt for a new chief executive and non-executive chair are also ongoing.

The company had 87 stores trading under its JD brand in the USA at the end of January, with 32 net new JD stores opening across Europe including its first stores in Poland and Romania. 

ii view:

JD sells high fashion sporting items such as training shoes and branded clothes. It operates a portfolio of around 3,100 clothing fashion stores spread across the UK & Ireland, Europe, the USA, and Asia Pacific. It also operates over 200 stores selling outdoor clothing and products such as Blacks, Millets and Go Outdoors. 

For investors, an uncertain economic outlook and a cost-of-living crisis for consumers provide a tough backdrop. The loss of the group’s CEO and run-ins with the Competition and Markets Authority cannot be ignored, while Brexit and supply chain challenges have offered their own hurdles.

On the upside, its move into North America continues to reap rewards, while governance issues are now being addressed. Online sales complement its high street outlets and the firm enjoys both geographical and brand diversity. In all, and while some caution in management outlook comments is understandable, a consensus analyst estimate of fair value sat at over 200p per share looks to give grounds for longer term optimism. 

Positives: 

• Diversity of product, brand name and geographical location
• Growing US sales

Negatives:

• Uneconomic outlook uncertainty
• New leadership required

The average rating of stock market analysts:

Buy