JD Sports Fashion (JD.) 435p

Loss to date: 7.4%

Our concern that high street sports retailer JD Sports Fashion (JD.) would be a victim of England’s weak performance in the World Cup turned out to be unfounded but we still see risks as being weighted to the downside. We adopted a negative stance on the stock at 405p (see Shares, Plays, 3 Jul) after the England football team produced its worst ever showing at a World Cup.

We thought related merchandise would be left unsold in the wake of the debâcle and expected half-year results (17 Sep) to prove us right. Given that interims to 2 August saw pre-tax profits double to almost £20 million, reflecting a strong performance from its sports arm and ‘a significant reduction in losses’ in a recovering outdoor division, we end our ‘short’ trade on the stock with a small loss. Sports operating profits grew by a third to £34.8 million with no mention nor sign of any World Cup hangover.

We still feel our wider negative view could prove correct in the medium-term for a number of reasons. For a start the stock looks pretty expensive for a retail play at 13.5 times consensus forecast January 2015 earnings per share of 31.9p. In addition second-half comparatives in the core UK and Ireland sports stores are demanding and the company remains dependent on Christmas trading if, as guided, it is to deliver results ‘towards the upper end of current market expectations’.

We remain negative but admit defeat on the World Cup-related trade.