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JD Sports smashes forecasts

Shares in JD Sports rose 5 per cent as the retailer announced a doubling of profit.
September 18, 2014

JD Sports (JD.) smashed market expectations with news that underlying pre-tax profit in the first half doubled to £20.9m, driven by a 12 per cent jump in like-for-like sales in the core sports division.

IC TIP: Hold at 425p

Chairman Peter Cowgill told us the outperformance was led by the UK and Ireland - and more specifically by shoes. JD has a dominant market position in the footwear segment, and many leading global brands have been innovating with special colours and designs. Group sales growth was also boosted by store openings in France, Holland and Germany. Mr Cowgill said he was particularly pleased with overseas trading, although it's still "early days".

Fashion continued to be a weak point, with losses widening from £6.8m to £8.2m. But it's worth noting that while the first quarter was very poor - which was somewhat expected - trading improved considerably in the second quarter. The Bank brand is still very much in turnaround mode, too; the second half should offer some clarity on how effective the changes have been.

The outdoors division narrowed its losses to £5.6m from £8.9m, not least thanks to like-for-like sales growth of 12 per cent. With the integration and restructuring of Blacks and Millets now largely complete, management can focus on improving performance. Mr Cowgill hopes the division will show steady progress in the second half, ending the year "at worst with considerably reduced losses".

It won't be as easy to achieve eye-catching like-for-like growth in the second half, though: JD is up against tough comparative numbers. Last year like-for-like sales rose 11 per cent in the UK and Ireland sports division, and, as Mr Cowgill says, "the air gets thinner the higher up the mountain you get". It also has the important Christmas trading period to pitch correctly. Still, management was confident enough to declare that full-year results should fall at the top end of current market expectations.

Cantor Fitzgerald expects pre-tax profit of £84.5m for the full year, giving EPS of 31p.

JD SPORTS (JD.)
ORD PRICE:425pMARKET VALUE:£ 827m
TOUCH:422-429p12-MONTH HIGH:456pLOW: 246p
DIVIDEND YIELD:1.6%PE RATIO:17
NET ASSET VALUE:134p*NET CASH:£11.2m

Half-year to 2 AugTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2013567.46.12.61.1125
2014721.516.56.51.15
% change+27+170+154+3

Ex-div: 04 Dec

Payment: 09 Jan

*Includes intangible assets of £113.4m or 58p a share