Join our community of smart investors

JD raises guidance once more

Sales retention was strong despite widespread store closures under lockdown restrictions
April 13, 2021
  • Headline pre-tax profits are expected to reach £475m-£500m this year
  • The FTSE 100 retailer said partners share its vision of elevation and collaboration
IC TIP: Buy

Physical stores were allowed to reopen this week in England and Wales, in a welcome reprieve for customer-starved retailers with battered revenues and squeezed cash flows.

But for some – namely those with extensive scale, international reach and a strong online operation – the blow was less severe. Among that cohort sits FTSE 100 group JD Sports (JD.), whose annual income statement wore the signs of considerable sales retention despite the small matter of a pandemic shutting down high-streets and shopping centres.

On the back of robust trading amid unprecedented challenges, the sportswear company has raised its guidance for the 2022 financial year. It now anticipates headline pre-tax profits of £475m to £500m, up 13 per cent year-on-year at the lower end of the range – far higher than its previous 5-10 per cent growth estimate.

For the 12 months ending 30 January 2021, that same measure of earnings came in at £421m – down just 4 per cent year-on-year, and broadly in keeping with a projection of “at least £400m” within January’s trading statement. At the time, consensus estimates stood at just £295m.

JD cited the “strength and premium position” of its brand as one factor driving its performance. The group also pointed to the flexibility of its “multichannel ecosystem”, as well as the positive relationship it has with a number of leading international partners. These brands, JD said, “recognise that we share their vision of an elevated marketplace and that we look to nurture collaborative affiliations over the long term”.

That focus on elevation and collaboration should, arguably, stand JD in good stead as household names Nike (US:NKE) and Adidas (GER:ADS) accelerate their push towards direct-to-consumer engagement – cutting out lesser third-party middlemen.

The company also flagged significant developments in the US, which it entered for the first time in 2018. With customer demand spurred by stimulus from Washington, JD’s ‘Finish Line’ division and eponymous business both enjoyed “exceptional” trading.

Year-end net cash stood at £795m (ex lease liabilities), up from £430m. But JD’s push overseas has relied on strategic acquisitions and that figure excludes £380m spent since the new year.

Brokerage Peel Hunt has raised its pre-tax profit estimate from £460m to £485m.

Having climbed two-thirds over the past year, JD’s shares command a forward price-earnings multiple of more than 20 times. But while the path of the pandemic cannot be accurately determined, the group’s agility during the Covid-19 crisis suggests it is well-placed for future twists and turns. Buy.

Last IC View: Hold, 838p, 25 Mar 2021

JD SPORTS FASHION (JD.)  
ORD PRICE:927pMARKET VALUE:£ 9.5bn
TOUCH:925-928p12-MONTH HIGH:936pLOW: 472p
DIVIDEND YIELD:0.2%PE RATIO:40
NET ASSET VALUE:120p*NET DEBT:76%
Year to 30 JanTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20172.3823818.41.55
20183.1629523.81.63
20194.7234026.91.71
20206.1134925.30.28
20216.1732423.11.44
% change+1-7-9+414
Ex-div:24 Jun   
Payment:02 Aug   
*Includes intangible assets of £820m or 80p a share