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JD outpaces the competition

The group has hit a new cash profit record
September 10, 2019

The acquisition of Finish Line in the US once again skewed JD Sports Fashion’s (JD.) sales figures to the upside in the six months to early August. Revenues were up 47 per cent as a result of the £725m boost from the acquired company, along with JD’s US business. However, exclude this and the group’s established business – including online – saw sales grow by a tenth in like-for-like terms. Such growth meant inventories increased in net terms, but it was down 10 per cent as a proportion of sales.

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Growth in the core UK and Ireland business came in at more than 10 per cent; particularly impressive in light of recent data from the British Retail Consortium showing footfall to the high street and shopping centres down 1.9 per cent and 2.2 per cent, respectively.

Outside of the UK, the athleisure retailer has continued its aggressive expansion, adding 23 stores in mainland Europe, seven across Asia Pacific and six in the US alongside its online offering. The UK business now accounts for around 41 per cent of sales, compared with 52 per cent at the same point last year. The group is expecting to add a similar number of stores across Europe and Asia Pacific in the second half, and will open a flagship US store in spring next year.

Management sounded a note of caution about the future, noting the toughening comparatives in the second half along with the obligatory mention of Brexit uncertainty. However, even counting for the dampening effect of new lease accounting rules, the group expects to report full-year adjusted profits in the midpoint of the current £402m-£424m range, an increase of 16 per cent.

Changes to said lease accounting rules have added £2.2bn in liabilities to JD’s balance sheet. Management noted that it has no plans to alter the size of its stores, but it is seeking “fairness and flexibility” in its terms.

Broker Peel Hunt upped its forecasts following the results announcement, and now expects adjusted pre-tax profits of £420m for the full year, giving EPS of 33.6p, up from £355.2m and 28.4p last year. 

JD SPORTS FASHION (JD.)  
ORD PRICE:671pMARKET VALUE:£6.53bn
TOUCH:670.2-671p12-MONTH HIGH:671pLOW: 318.5p
DIVIDEND YIELD:0.3%PE RATIO:25
NET ASSET VALUE:118p*NET CASH:£118m
Half-year to 03 AugTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20181.8512210.10.27
20192.721309.70.28
% change+47+7-4+4
Ex-div:28 Nov   
Payment:3 Jan   
*Includes intangible assets of £464m, or 48p a share