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JD Sports Fashion posts record results

Acquisitions helped boost revenue, as the company gets to grips with regulatory matters
June 22, 2022
  • Margins up
  • Corporate governance overhaul

In its delayed full-year release, JD Sports Fashion (JD.) announced record profits and a robust margin performance, in a year marred by Competition and Markets Authority (CMA) investigations and corporate governance concerns.

A governance overhaul is in progress after executive chair Peter Cowgill’s departure in May. The CMA fined JD Sports £4.3mn in February over corporate governance irregularities relating to the attempted purchase of smaller rival Footasylum. A £2mn provision has also been recorded due to the regulatory body’s ongoing investigation into the sale of replica football shirts.

But this doesn’t obscure what was an impressive financial performance. The top line was helped by recent acquisitions, with revenue up almost sevenfold to £390mn at retailer Shoe Palace, while footwear business DTLR generated £383mn in revenue since in the 46 weeks post-acquisition period. Sales at the JD UK and Ireland business, meanwhile, were up by £508mn to £2.3bn.

Gross margin rose by 110 basis points to 49.1 per cent, boosted by performance in the United States where the margin soared by 310 basis points to 49.8 per cent and where demand was succoured by the government’s fiscal stimulus.

Quilter Cheviot equity research analyst Mamta Valechha said that the results “should offer a lot of reassurance, given no accounting issues, with the delays due to taking additional time to properly finalise the corporate governance workstreams”.

The shares are relatively inexpensive – Peel Hunt analysts have them trading at a mere eight times forward 2023 earnings. Recent trading has been strong, with like-for-like sales up 5 per cent between the results and June despite cost of living pressures, and progress on governance is encouraging. Buy.  

Last IC View: Buy, 215p, 12 Jan 2022

JD SPORTS FASHION (JD.)  
ORD PRICE:107pMARKET VALUE:£5.52bn
TOUCH:106.8p-107p12-MONTH HIGH:236pLOW: 99p
DIVIDEND YIELD:0.3%PE RATIO:15
NET ASSET VALUE:37p*NET DEBT:45%
Year to 29 JanTurnover (£bn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
2018**3.162954.760.33
2019**4.723405.380.34
2020**6.113495.060.06
20216.173244.610.29
20228.566557.170.35
% change+39+102+56+21
Ex-div:7 Jul   
Payment:5 Aug   
*Includes intangible assets of £1.47bn, or 28p a share **Per share figures restated due to 5:1 share split approved by shareholders on 26 Nov 2021