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JD Sports profits hurt by online shift

The sports fashion retailer withheld rent from some of its landlords during the period
JD Sports profits hurt by online shift

Coronavirus has rendered full-year guidance from companies as something of a rarity these days. But JD Sports Fashion (JD.), which is flush with cash and delivering sales ahead of expectations, said that it expects pre-tax profits of at least £265m for the year.

IC TIP: Hold at 776p

JD’s profits did suffer over its first half from the necessary switch to greater online volumes, enforced by store closures, which incurred additional costs and dampened margins. JD’s sports fashion gross profit margin edged down 150 basis points to 45.9 per cent, primarily due to increased promotional activity after store reopenings to clear stock. But it managed to retain more than 90 per cent of its total revenues during the period, while rent deferrals and relaxed supplier terms helped boost JD’s net cash pile to £765m, excluding lease liabilities.

JD withheld rent from some landlords, arguing that it would be unfair to pay full rent in the absence of any income from a store. It has successfully renegotiated terms with some landlords, observing that others have been “more intransigent in their approach”.

House broker Peel Hunt forecasts full-year 2021 adjusted pre-tax profits and earnings per share of £270m and 21.9p respectively, rising to £420m and 34p in 2022.

JD SPORTS FASHION (JD.)  
ORD PRICE:776pMARKET VALUE:£ 7.55bn
TOUCH:775-776p12-MONTH HIGH:890pLOW:275p
DIVIDEND YIELD:NilPE RATIO:36
NET ASSET VALUE:131p*NET DEBT:77%
Half-year to 01 AugTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20192.72129.99.670.28
20202.5441.53.85nil
% change-7-68-60-
Ex-div:na   
Payment:na   
*Includes intangible assets of £405m, or 42p a share