After doubling in 2019 and joining the FTSE 100 index, our head of markets explains why JD is so hot.
The core UK business is not immune from the current economic uncertainty and is mindful of the wider impact a disorderly exit from the EU could bring, but nonetheless its 10% growth in like-for-like sales will be the envy of many other beleaguered retailers.
Of equal interest to investors, though, are the company's international aspirations. The company opened 23 stores across Europe in the period, 7 in Asia Pacific and through its acquisition of Finish Line in the US, is now building a presence in a potentially rewarding market. The planned opening of a flagship store in Times Square, New York, next Spring should prove a defining moment within the drive for international acceptance.
The pace of progress is also reflected in the actual numbers, with global like-for-like sales rising 12%, group revenues adding 47%, positive improvements to the net cash position and the earnings per share metric, all of which resulted in a 30% hike in pre-tax profits.
Source: TradingView Past performance is not a guide to future performance
Given the speed and scope of expansion, there will inevitably be bumps along the way, as evidenced by the challenges of the fulfilment transition relating to the Go Outdoors business, which has had a short-term negative impact. In addition, the pace of expansion will always carry integration risk, and may also top-slice metrics such as the gross margin.
The acquisition of the Finish Line business, for example, is largely responsible for the reduction of gross margin from 48.2% to 46.9%, although at such an elevated level the actual impact is of less consequence.
- The Week Ahead: AB Foods, JD Sports, Wm Morrison
- ii Winter Portfolio doubles after fifth market-beating year
Meanwhile, the JD Sports can hardly be viewed as an income stock, with a dividend yield of just 0.3% being the result of a policy to deliberately restrain dividend growth as the company continues its expansion. In terms of outlook, management recognises that tougher comparatives ahead will provide an additional challenge.
Even so, unbridled optimism for growth prospects has meant that appetite for the stock remains undiminished. Despite a share price rise of 28% over the last year (the FTSE 100 index has lost 0.6% in that period) and, indeed, 137% over the last three years, the market consensus of the shares as a 'strong buy' will no doubt remain intact for the time being.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.