ii view: JD Sports resumes revival

Full-year results to 31 January

• Total revenues up 10.5% to £12.66 billion
• Adjusted profit down 7.7% to £852 million
• Free cash flow up 36% to £462 million
• Net cash held before lease liabilities of £311 million, up from £52 million a year ago
• Final dividend of 0.87p per share
• Total dividend for the year up 20% to 1.2p per share

Guidance:

• Expects profits for the current full year of between £750 million and £850 million
• New £200 million share buyback for the financial year ahead

Chief executive Régis Schultz said:

"Our deep understanding of our customers and lifestyle trends give us a clear view of how they want to shop and spend, allowing us to consistently deliver the right products, in the right places and at the right prices. This customer‑led focus, alongside disciplined cost and capital management, supported a 36% increase in free cash flow.

"Whilst we continue to expect muted market growth in FY27, we remain confident in JD Group's medium‑term trajectory, underpinned by our strong brand partnerships and agile, multi‑brand model.”

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ii round-up:

Global sports fashion retailer JD Sports Fashion (LSE:JD.) operates 4,811 stores and a series of websites across 36 countries.

Away from JD Sport itself, other store brands include Size?, Shoe Palace, Courir and Sprinter. Outdoor brands owned in the UK include Blacks, Millets and Go Outdoors.

For a round-up of these latest results announced on 7 May, please click here.

ii view:

Founded in 1981, the Bury, Manchester headquartered company today employs around over 90,000 people. Footwear generated most sales during its last financial year at 60%, followed by apparel at 30%, accessories 6.5% and outdoor and other sales such as gym memberships the balance of 3.5%.

Geographically, North America accounted for most sales over this latest year at 38%, followed by Europe at 33%, the UK 25%, and Asia Pacific the balance of 4%.

For investors, management’s prediction for a weak spending outlook at its core customer demographic and an ongoing product cycle evolution see it forecasting a potential decline in annual adjusted profits. Like all retailers, the weather can influence the group’s sales performance, US trade tariffs and their impact on product costs, many of which are made in Asia, are not to be forgotten, while AI and its impact on jobs for the young, the retailer’s core customer demographic, is not to be overlooked.  

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On the upside, like-for-like North American sales, its biggest region, improved to a decline of just 0.6% in the first quarter from a drop of 1.8% over the last financial year. Group actions to improve performance including more focused marketing, driving cost savings from previous takeovers and investing in technology to aid online performance, continue. Some influence from sporting events has been seen in the past, with the football World Cup kicking off this month in North America, the company's biggest market, while improved free cash flow now underpins an increased focus on shareholder returns, with the shares offering a forecast dividend yield of around 1.6%.

In all, management predictions for reduced to flat profits for the current financial year offer caution. That said, ongoing self-help actions, improving US sales, and a consensus analyst estimate of fair value above 100p per share will likely keep more speculative investors interested in recovery potential.

Positives:

Diversity of product, brand name and geographical location

Management actions to improve performance

Negatives:

• Uncertain economic outlook
• Subject to currency movements

The average rating of stock market analysts:

Strong hold