Star stock JD Sports does it again!

After doubling in 2019 and joining the FTSE 100 index, our head of markets explains why JD is so hot.

The momentum which has seen the company grow apace and propelled the shares into the FTSE 100 index shows no signs of abating, as JD Sports (LSE:JD.) has unveiled another set of impressive numbers.

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. 

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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.