- Sportswear titan delivers impressive Christmas sales
- North America ‘recovered strongly’
- Rough 4% profit upgrade dependent on January sales
Shares in JD Sports Fashion (JD.) jumped 6.4% to 149.9p after the self-styled ‘King of Trainers’ reported bumper festive sales and said it expects pre-tax profits for the year to January 2023 to come in ‘towards the top end’ of the £933 million to £985 million forecast range.
This implies a 4% upgrade on previous guidance, though the FTSE 100 retailer cautioned that the final full year outturn will depend on trading during January sales, particularly in Europe.
SALES GROWTH TOPS 20%
One of Shares’ stock picks for 2023, the sneakers-to-tracksuits seller highlighted ‘particularly impressive’ Christmas sales in its organic retail businesses, both in stores and online, with total sales growth topping 20% over the peak six weeks to 31 December 2022.
Over the 22 weeks to the end of December, JD Sports’ organic retail revenue grew by more than 10% compared with growth of 5% in the first half, in the face of a highly promotional environment in sportswear.
Like Next (NXT), JD Sports cited product availability as a primary growth driver and said it was ‘encouraged by the performance of our global premium sports fascias. Notably, our businesses in North America have, as expected, recovered strongly delivering growth of more than 20% through the second half to date’.
The retailer also sounded fairly upbeat about the year to January 2024, with management confident the JD brand will continue to resonate with the global consumer.
As such, JD Sports Fashion is guiding to pre-tax profits of ‘just over £1 billion’ for next year, ahead of the £983 million called for by consensus and supported by an acceleration in its global investment during the year.
WHAT IS SCHULTZ SAYING?
CEO Regis Schultz commented: ‘The engagement and commitment of our teams through the peak trading period has been phenomenal with many of our stores and websites delivering record sales and JD’s market-leading product and retail experience capturing the imagination of customers globally like never before.
‘Our strategic focus on the international and digital expansion of our global premium sports fascias is underpinned by the continued strength of these businesses.’
EXPERT VIEWS
AJ Bell investment director Russ Mould commented: ‘This is a story of the survival of the fittest. Weaker retailers have fallen by the wayside as the likes of Next and JD have come to the fore - the latter even enjoying highest ever weekly sales in the run-up to Christmas.
‘This is testament to the continuing appeal of the brands which fill JD’s stores and to a youthful consumer who are often living at home and therefore don’t have utility bills, rent or a mortgage to pay.’
Mould added: ‘JD is also benefiting from improved availability of products and easing shipping costs - two headwinds which had an impact on profitability in 2022.
‘All eyes will now be on a big investor day at the beginning of February when JD will be expected to update on its digital strategy and what it intends to do with its increasingly large pile of cash.’
Shore Capital, which has a ‘buy’ rating on the stock, said: ‘In our view, JD Sports remains a best-in-class retailer amongst our universe of general retailers. The company is tightly managed with excellent cash generation with tight stock and cost controls.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (James Crux) and the editor of the article (Steven Frazer) own shares in AJ Bell.
