- Q2 like-for-likes up 2.4%
- Full year profit guide maintained
- Outlook caution limits gains
Shares in JD Sports Fashion (JD.) jumped 6% to 136p after the trainers-to-tracksuits purveyor reported improved second quarter sales and reiterated full year guidance for 6% to 9% organic growth and adjusted pre-tax profit in the £955 million to £1.035 billion range.
This came as a relief to investors given the tougher, more promotional market for clothing and footwear that triggered a New Year profit warning from JD Sports, and the cracks that have appeared in the athleisure market with the likes of Nike (NKE:NYSE) and Lululemon (LULU:NASDAQ) finding life harder.
However, JD Sports’ cautious outlook for the rest of the year, with the global macro environment remaining ‘volatile’, kept a lid on share price gains.
POSITIVE STRIDES
Like-for-like sales nudged up 2.4% in the quarter to 3 August 2024 versus the 0.7% decline delivered in the first quarter, a sequential improvement the self-styled ‘king of trainers’ attributed to softer prior year comparatives and the strength of its ‘multi-brand operating model’.
Broker Panmure Gordon added that Nike’s increased focus on improving supply to key wholesale partners was another contributor to JD Sports’ second quarter sales pick-up.
CEO Regis Schultz highlighted the FTSE 100 retailer’s double-digit organic sales growth in North America and Europe in Q2, supported by the ‘continued success of our JD store rollout programme’.
And while UK same-store sales fell by 0.8% in Q2, there was a notably improved trajectory.
Schultz added that the recently completed acquisition of US sports fashion retailer Hibbett should contribute to the growth and development of JD Sports’ business in the world’s largest sportswear market in the years ahead.
And having demonstrated ‘good promotional discipline’, JD Sports maintained its year to January 2025 pre-tax profit guidance of £955 million to £1.035 billion, implying 3.5% year-on-year growth at the mid-point of the range.
EXPERT VIEWS
Mamta Valechha, consumer discretionary analyst at Quilter Cheviot, said: ‘JD Sports is performing well across all regions, with North America the strongest of the lot. It is here where we should see further growth following the acquisition of Hibbett, enhancing JD Sports’ exposure in the South-East and Mid-West of the US. This deal has been completed ahead of schedule and is highly complementary to the JD Sports business.’
Dan Coatsworth, investment analyst at AJ Bell, commented: ‘JD Sports’ latest trading update will be a big relief to investors. It is still growing sales and there was only a small dip in margins, which might surprise given how many retailers have resorted to discounting to shift goods.’
However, Coatsworth observed that the Hibbett takeover means JD Sports is increasingly reliant on the US for sales.
‘JD will be hoping the country avoids recession,’ said Coatsworth, ‘otherwise the acquisition could look ill-timed. It would be embarrassing if sales fall short of expectations after spending $1 billion on the deal.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Martin Gamble) own shares in AJ Bell.
