Shares in JD Sports Fashion (JD.) rallied 5% to 381.7p on Tuesday, despite the sportswear retailer pushing back the publication of full year results to the second half of May and pulling guidance for the year to January 2021.
The delay is due to current coronavirus uncertainty and reflects the potential for further government actions to combat the virus in the territories where JD Sports trades.
Yet investors bid the stock up, relieved after the high-quality, cash-generative retailer insisted it has sufficient cash resources to see it through the pandemic.
SHUTTING UP SHOP
With a few exceptions, the UK retail industry has completely pulled down the shutters. As of now, the sports fashion brands seller with a winning formula and global growth to shoot for has shut ‘essentially all’ of its stores in the UK, United States and Europe.
The sector star-turn is experiencing major disruption as a result, although Mike Ashley-controlled arch-rival Sports Direct wants to keep its shops open despite new regulations requiring non-essential shops to close during the coronavirus outbreak. It has asked the government for permission to do so on the tenuous grounds that sports equipment is essential.
CAPITAL PRESERVATION
‘Whilst our trading websites continue to accept and fulfil orders and, whilst we have seen a resilient performance to date in most territories, this represents a comparatively small mitigation in terms of overall profit contribution,’ warned JD Sports in today’s update.
As the crisis escalates, JD Sports is pursuing a number of measures to preserve capital across all aspects of its business and limit cash burn. Management is ‘satisfied’ that the combination of ‘a strong balance sheet, net cash resources and the substantial working capital facilities available to the group in its various territories are more than adequate to meet the cash deficiencies which may reasonably be anticipated during the closure periods in our various territories.’
Delaying results for the year to 1 February 2020 will also allow the athleisurewear purveyor to provide greater clarity around the impact of the virus on performance for the current year to January 2021.
FIGHTING FIT
Executive chairman Peter Cowgill commented that along with everyone else, his charge is ‘experiencing major disruption to our business operations as we seek to protect our colleagues and customers from the effects of coronavirus. Their safety remains our number one priority and we continue to take all appropriate action in line with government advice in our various territories.’
He insisted JD ‘continues to offer a market-leading, multi-channel proposition in Sports Fashion Retail and we are confident that we will emerge from the current challenges in a strong position to resume our previous positive momentum.’
