Much has been made of the challenges in UK retail, but JD Sports Fashion (JD.) is showing little sign of slowing down. On the contrary, the group’s results for the year to 2 February 2019 indicate an acceleration in sales growth – up by almost a half, compared with an already impressive increase of a third last year. Admittedly, gross margins were down 90 basis points to 47.5 per cent, primarily due to the sales mix following the acquisitions of lower-margin Finish Line and Sport Zone. However, gross profits still jumped 46 per cent.
The results were enough for house broker Peel Hunt to crown it a “truly vintage year”, upgrading forecasts for adjusted pre-tax profits to £395m for 2020, giving EPS of 31.8p, up from £355m and 28.4p in 2018.
Management noted that the group “is not immune” to the malaise facing UK retail, but in spite of this it managed to expand its footprint in the period, with a net rise of five stores in the UK and Ireland, and 10 new gyms, bringing the total to 23. Conditions were more challenging for the outdoor brands, with Blacks, Millets and Ultimate Outdoors, with a net loss of one store each as the hot, dry summer cut demand for waterproofs.
However, the real growth story is outside the UK. Global markets accounted for 78 of the group’s 83 net store openings in the period. The US market is often a tough one for UK retailers to crack, but early indications following the acquisition of Finish Line are good. Pro-forma like-for-like sales were ahead 7 per cent, thanks in large part to online growth of more than a fifth.
Management is alive to the highly inherent unpredictability of retail customers, and so is slow to go into detail on performance post period-end – especially with Easter just around the corner. Nevertheless, it admits to being pleased with the group’s “continued underlying positive performance”.
| JD SPORTS FASHION (JD.) | ||||
| ORD PRICE: | 552p | MARKET VALUE: | £5.37bn | |
| TOUCH: | 551.6-552p | 12-MONTH HIGH: | 560p | LOW: 319p |
| DIVIDEND YIELD: | 0.3% | PE RATIO: | 21 | |
| NET ASSET VALUE: | 104p* | NET CASH: | £125.2m | |
| Year to 02 Feb | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2015 | 1.52 | 90.5 | 7.0 | 1.41 |
| 2016 | 1.82 | 132 | 10.0 | 1.48 |
| 2017 | 2.38 | 238 | 18.4 | 1.55 |
| 2018 | 3.16 | 295 | 23.8 | 1.63 |
| 2019 | 4.72 | 340 | 26.9 | 1.71 |
| % change | +49 | +15 | +13 | +5 |
| Ex-div: | 27 Jun | |||
| Payment: | 5 Aug | |||
| *Includes intangible assets of £394m, or 41p a share | ||||
