ii view: why JD Sports shares raced to top of FTSE 100 leaderboard

This FTSE 100 retailer has rallied two-thirds since hitting a low in October. Buy, sell, or hold?

Trading update for the 6 weeks to 31 December

• Revenue up 20% year-over-year
• Now expects current full year profit at the upper end of estimates between £933-£985 million

Chief executive Régis Schultz said: 

"The engagement and commitment of our teams through the peak trading period has been phenomenal with many of our stores and websites delivering record sales and JD's market-leading product and retail experience capturing the imagination of customers globally like never before."

"Our strategic focus on the international and digital expansion of our global premium sports fascias is underpinned by the continued strength of these businesses."

ii round-up:

Global sports fashion retailer JD Sports Fashion (LSE:JD.) now expects full-year profit to be at the upper end of City forecasts as sales during the six weeks to the end of December rose by a fifth compared to the year before. 

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Profit before tax and exceptional items for the year to 28 January is now expected to come in at the higher end of analyst estimates of £933-£985 million, although remains subject to post-Christmas sales still to occur in some of its most important European markets. 

JD shares rose by more than 6% in UK trading, extending gains since the October low to two-thirds, although they came into this latest update down by around a third over the last year. Shares for sporting goods maker Nike Inc Class B (NYSE:NKE) are down by under a fifth over that time while online clothing retailers Boohoo Group (LSE:BOO) and ASOS (LSE:ASC) have both slumped by more than two-thirds. 

JD Sport sales for the 22 weeks to end of December rose 10% compared to a gain of 5% over the first half of the year. Aided by an improved in product availability, sales for its North American businesses had recovered strongly, rising by more than a fifth over the second half. 

Sales momentum elsewhere and including its home UK market, both in store and online, had maintained the pace seen in the first half.

JD management now expects pre-tax profit for the year ahead to early February 2024 to come in at over £1 billion. 

Broker UBS reiterated its ‘buy’ stance on the shares following the update. The relatively new chief executive is expected to outline an updated strategy at the group’s Capital Markets Day on 2 February.  

ii view:

Started in 1981 and headquartered in Bury, Manchester, JD Sport today operates both stores and websites across the UK and Ireland, Europe, North America, and Asia. Selling high fashion sporting items such as branded clothes and trainers, its store brands include JD Sport, Size?, Footpatrol and Tessuti. In the UK, it also sells outdoor items across brands such as Blacks, Millets and Go Outdoors.

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For investors, the challenging economic backdrop including a cost-of-living crisis cannot be forgotten. Sporting goods makers such as Nike are also looking to build on their own direct relationship with consumers, costs generally for businesses are rising, while a relatively new CEO brings some uncertainty as to how group strategy will unfold. 

On the upside, previous issues with product availability following the pandemic looks to have improved. Diversity in both products sold and geographical regions operated in is also encouraging, and signs are that JD is able to cope with what is no expected to be a shallow economic downturn.

On balance, recent performance, a track record of success and consensus analyst estimate of fair value standing at over 190p per share arguably gives grounds for hope of further progress. 

Positives: 

• Diversity of product, brand name and geographical location
• Continued new store openings 

Negatives:

• Uncertain economic outlook
• Subject to currency movements

The average rating of stock market analysts:

Buy