ii view: JD Sports flies stars and stripes

Challenges including Covid remain, but both the US and online look positive. Buy, sell or hold?

First-half results to 31 July

• Revenue up 53% to £3.89 billion
• Pre-tax before of £365 million, up from £41.5 million
• Net cash up 30% to £995 million
• No interim dividend (2020; nil)

Guidance:

• Expects headline full-year pre-tax profit of at least £750 million
• May pay a larger final dividend

Executive chairman Peter Cowgill said:

"We remain absolutely confident that our inherent strengths in retail dynamics and operations provide us with a robust platform to make further progress.

"At this time, we are generally encouraged by our performance in the first few weeks of the second half although retail footfall remains comparatively weak in many countries. The JD brand is increasingly recognised on a global basis and this result bears testimony to the underlying strength of our business."

ii round-up:

Retailer JD Sports Fashion (LSE:JD.) operates both brick & mortar store outlets and over 15 localised trading websites. 

Its brands include JD itself, Size?, Footpatrol and Finish Line. 

For a round-up of these latest results, please click here.

ii view:

JD sells high fashion sporting items such as training shoes and branded clothes. It operates a portfolio of around 2,400 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. The UK generated its biggest slug of sales in this latest half-year period at 38%, with the US coming in at 35%, Europe at 23% and the Rest of the World 4%. 

For investors, uncertainty with regards to the pandemic cannot yet be completely dismissed. A move to pay no interim dividend due to management caution offers a reminder, even if a larger final dividend could be the eventual outcome. Brexit and supply chain challenges are also being battled, while some cooling of US customer demand could now be seen as US government spending stimulus fades.

• Alex Sebastian: supply chain troubles are hidden threat to your finances

That said, previous acquisitions and elevated US profit in this latest period underline the country’s growing importance to JD Sports. Compensating online sales have seen it weathering pandemic store closures relatively well, while a previous logistics deal with Clipper arguably underlines its intention to continue pushing the channel. In all, and allowing for the retailer’s strong long-term track record, JD looks to remain deserving of continued investor support.    

Positives: 

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

Negatives:

• Ongoing pandemic uncertainty
• Some Brexit challenges

The average rating of stock market analysts:

Strong buy