Unemployment is rising fastest among the younger section of the UK's would-be workforce, a problem reflected in first-half results from youth-focused sportswear retailer JD Sports. Despite being marginally ahead of consensus expectations, a closer examination of the figures suggests the recession is finally forcing younger buyers to compromise on style.
Underlying profit-before-tax was up 14.5 per cent to £14.2m on a 0.7 per cent increase in like-for-like sales, driven by a 3.1 per cent like-for-like increase in sales at its fashion outlets and a 0.3 per cent increase in its sports fascias.
As the company pointed out, sports "remains the core of group profitability." Profits from JD's sports retail business climbed by £1m to £17.2m, while its dedicated fashion outlets remained loss making to the tune of £2.7m, with the group blaming issues in its legacy Scotts shops. That was at least less than the £3.3m it lost in the same period last year, but the fashion division's performance has deteriorated since the period end. Like-for-like sales were down 2.4 per cent in the six weeks to 12 September, although that should be offset by 8 new Bank-branded store openings in the second half.
Fortunately, its sports division has traded better since the half-year-end, with a like-for-like sales increase of 1.3 per cent compensating for fashion's weakness and boosting like-for-like sales up by 0.8 per cent. That improvement on the first half looks even better given the group admitted that it had seen a like-for-like sales decline across the group in the two months leading up to 1 August period-end. However, it said that although the rest of the year would be up against much weaker comparable figures, the outcome for the full year was still dependent on solid Christmas trading and at the mercy of consumer belt-tightening.
Even so, JD is optimistic on prospects for its French business, Chausport, which it acquired in May, and its newly acquired rugby brands Kooga and Cantebury. Broker Seymour Pierce expects pre-tax profits of £55m and EPS of 78.2p in the year to 31 January 2010 (2009: £54.5m and 80.7p).
JD SPORTS FASHION (JD.) | ||||
|---|---|---|---|---|
| ORD PRICE: | 585p | MARKET VALUE: | £285m | |
| TOUCH: | 581-590p | 12-MONTH HIGH: | 619p | LOW: 175p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 11 | |
| NET ASSET VALUE: | 225p* | NET CASH: | £5.9m | |
| Half-year to 1 Aug | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 299 | 9.1 | 12.5 | 3.10 |
| 2009 | 324 | 10.1 | 14.4 | 3.30 |
| % change | +8 | +11 | +15 | +6 |
Ex-div:02 Dec Payment:08 Jan *Includes intangible assets of £43.5m or 89p a share | ||||
