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JD beats high street gloom

The sportswear retailer has tapped into youth culture to help it beat the wider spending slump on the British high street
April 17, 2018

These results from JD Sports (JD.) came in ahead of analyst expectations despite strong prior-year comparatives, prompting further upgrades to current-year numbers. Total sales rose by a third for the year ended 3 February, which helped lift annual profits by a quarter. But break that down further, and like-for-like sales across stores rose by a solid 3 per cent, marking a good performance in the UK and Europe, while online sales accelerated by 30 per cent over the same period. Overall, the underlying growth rate, inclusive of website sales, came in at 7 per cent.

IC TIP: Buy at 373.2p

The sports retailer continues to go from strength to strength, having taken annual profits from approximately £100m to £300m in just three years. And chief financial officer Brian Small is optimistic the brand can continue its success on home soil, even in the face of rising inflation, wage stagnation and a squeeze in consumer spending. He admits the UK consumer is under pressure, but JD’s core customer is “youth-orientated”, meaning the desire for designer gear often overtakes economic concerns – a higher propensity to consume.

JD is also trying to parlay this success across the pond. Having already expanded into Europe, parts of Asia and Australia, the group made a $558m (£396m) bid for American sportswear retailer The Finish Line shortly before Easter. Mr Small said a preliminary contract has been signed, but Finish Line investors have yet to approve the deal via a shareholder vote. All being well, the transaction should complete in June. JD Sports – which finished the year with more than £300m in the bank – will slip into a net debt position once the deal is done. Although there are no specific leverage targets or limits in place, Mr Small said the group would consistently review its position against investment requirements and future acquisitions.

Analysts at Peel Hunt expect pre-tax profit of £325m for the year ending January 2019, giving EPS of 26.3p, moving up to £341m and 27.6p in FY2020.

JD SPORTS (JD.)   
ORD PRICE:373.2pMARKET VALUE:£3.6bn
TOUCH:373.1-373.8p12-MONTH HIGH:462pLOW: 300p
DIVIDEND YIELD:0.4%PE RATIO:16
NET ASSET VALUE:79p*NET CASH:£310m
Year to 3 FebTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20141.2276.85.81.36
20151.5290.57.01.41
20161.8213210.01.48
20172.3823818.41.55
20183.1629523.81.63
% change+33+24+30+5
Ex-div:28 Jun   
Payment:6 Aug   
*Includes intangible assets of £211m, or 22p a share