- Like-for-like sales 5% ahead in first 5 months of year
- Retailer confident of delivering good Back to School and Christmas sales
- Broker highlights positive Frasers read-across
Sportswear giant JD Sports Fashion (JD.) still expects pre-tax profits will match last year’s record performance after delivering robust 5% like-for-like sales growth in the first five months of its new financial year.
The trainers-to-replica kits seller also sees 35% to 40% of this year’s profits being generated in the first half as trading patterns normalise, implying confidence that sales will prove resilient during the Back to School and Christmas selling seasons.
SALES MOMENTUM CONTINUES
The sports, fashion and outdoor brands purveyor assured investors its positive start to the new financial year continued through June and that after five months, like-for-like sales remain 5% ahead of the prior year.
Shares in JD Sports traded 1p lower at 141.5p by mid-morning however, as some investors booked profits following a recent rally and the news UK retail sales volumes fell 0.1% in June amid the escalating cost-of-living crisis weighed on sentiment.
According to AJ Bell investment director Russ Mould, JD Sports’ sales increase suggests athleisure items are still in demand and ‘perhaps indicates that its younger clientele, who may live at home or rent from a landlord who is picking up some of the slack from rising bills, have seen slightly less disruption to their disposable incomes than the rest of us’.
At this stage, JD Sports’ board remains confident headline profit before tax and exceptional items for the year to January 2023 will be flat on last year’s record £947.2 million haul, which was more than double the previous record of £438.8 million set in full year 2020, the last financial year before the pandemic.
POSITIVE READ-ACROSS
Shore Capital highlighted a positive read-across for JD Sports following yesterday’s forecast-beating results and a massive profit upgrade from arch-rival and Sports Direct-owner Frasers (FRAS).
As the broker pointed out, Frasers’ shares jumped 20% on the numbers ‘given the striking contrast implied by the guidance compared to the series of profit warnings from the sector.’
Bullish on the JD Sports investment case, Shore Capital stressed today’s statement ‘represents an additional step in the right direction to support the valuation, which we deem deeply attractive.’
JD Sports added that recently appointed new chairman Andy Higginson is ‘fully involved’ in the retailer’s ongoing process to hire a new CEO following the shock departure of executive chairman and long-standing boss Peter Cowgill on 25 May.
The appointment of a new CEO offers a potentially powerful catalyst, and the board has interviewed a number of high calibre candidates for the role.
JD Sports is also reportedly in talks with private equity outfit Aurelius over the sale of Footasylum, a much smaller rival acquired in 2019 for £90 million, in a disposal forced by the Competition and Markets Authority (CMA) following a protracted investigation.
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
