Shares in branded sports and casual wear star turn JD Sports Fashion (JD.) jump 4% to 553.2p as record full year results reveal double digit earnings growth and trigger yet another round of forecast earnings upgrades.
Defying the wider UK high street doom and gloom, Bury-headquartered JD Sports has real momentum at its heels as it continues to benefit from the athleisure boom among youthful gym-goers and fashion-savvy consumers.
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For the year ended 2 February 2019, the sports, fashion and outdoor brands purveyor sprints in with a 15.5% surge in adjusted pre-tax profit to £355.2m, with earnings per share jumping 12.9% to 28.4p.
Sitting on £125.2m net cash JD Sports, one of Shares’ running Great Ideas selections, also raises the total dividend by a healthy 5% to 1.71p.
JD’S WINNING FORMULA
Particularly impressive is the momentum in the core Sports Fashion businesses, where JD Sports generated like-for-like sales growth of 6%, helped by double digit growth from both Europe and Asia.
‘We firmly believe that the elevated and dynamic multibrand multichannel proposition of the core JD fascia, which enjoys the ongoing support of the key international brands, has the necessary agility to continue to exceed consumer expectations and prosper in an increasing number of international markets’, enthuses executive chairman Peter Cowgill.
JD recently acquired smaller rival Footasylum (FOOT:AIM), perhaps in a bid to keep it from the clutches of Mike Ashley.
WHY IS IT DOING SO WELL?
At a time when many UK retailers are fighting for survival, JD Sports is thriving by providing a differentiated proposition to the consumer with an attention-grabbing theatre in stores and online.
Close ties with powerhouse brands Nike and Adidas, as well as an expanding international footprint, are also helping.
And despite the long hot summer and mild weather through the winter, JD Sports’ outdoor division still managed to generate a positive EBITDA of £10m, albeit down from £23m a year earlier.
Encouragingly, JD Sports also highlights like-for-like sales growth across the acquired US business Finish Line.
‘We believe that our acquisition of the Finish Line business in the United States, the largest market for sport lifestyle footwear and apparel and the home to many of the global sportswear brands, will have positive consequences for our long-term brand engagement whilst significantly extending the group’s global reach,’ adds Cowgill.
THE EXPERTS’ VIEW
Broker Peel Hunt comments: ‘It’s hard to think of such an impressive showing anywhere else in retail and JD’s like-for-like sales growth and profit delivery is stellar, despite the negative background and awkward weather for outdoor.
‘The JD format is resonating with both sports brands and customers worldwide, and the US has started really well.’
Upgrading its profit forecasts, the broker adds: ‘Recent trading sounds like it has been impressive and there is yet another upgrade here. The shares have gone from strength to strength and we see no reason why this won’t continue as the strength of the JD brand, its management and its general forward momentum show no sign of waning.’
Russ Mould, investment director at AJ Bell, says: ‘JD is living proof that parts of the retail sector are alive and well. Sales continue to soar as it has found the perfect ingredients to keep the tills ringing.
‘It is engaging with customers by offering exclusive products and staying abreast of constantly changing fashion trends. It is also recognising the hard work of staff and giving them interesting career development opportunities thanks to its increasing global scale.
‘The acquisition of Finish Line opens the doors to the US market which is the largest market for sport lifestyle footwear and apparel. It also provides an opportunity to export JD’s formula so that it can improve Finish Line’s profits.
‘However, you mustn’t forget the big infrastructure issue that hangs over all fast-growth retail businesses. They need to invest heavily in warehouse capacity in order to fulfil orders and this work doesn’t always go smoothly, as the likes of ASOS (ASC:AIM) and others have found out.
‘JD is extending its Kingsway warehouse and flags disruption to operations which it says could continue across the first-half of its current financial year. This is an area to watch as JD doesn’t want to get into the situation where it cannot meet demand.’
