- Profit approaches £1 billion
- Adjustments cut earnings in half
- Outlook for this year uninspiring
Investors in JD Sports Fashion (JD.), the FTSE 100’s own ‘King of Trainers’, may be wondering why, when the firm posted almost £1 billion of pre-tax profits in the last year, the shares haven’t jumped this morning.
Instead, they are down 5% to 162p, seemingly on a combination of high hopes coming into the report and muted expectations for profit growth for the year to next January.
SALES SURPRISINGLY STRONG
For the year to January 2023 the firm generated revenue of £10.125 billion, an increase of 18% on the previous year and 12% on an underlying basis with a significant pick-up in the second half, especially in the US, as supply chains eased and the company was able to stock more products.
Adjusted pre-tax profit rose 4.7% to £991 million, a new milestone for the firm, but provisions for goodwill write-downs, losses on non-core asset disposals and hedging contracts knocked underlying pre-tax profit down 33% to £441 million from £655 million a year earlier.
Chairman Andrew Higginson said JD ‘continues to be the partner of choice for many international brands who see our premium fascias as the natural global home for their latest ranges and freshest new styles’.
The firm announced in September 2022 that JD was Nike's first European retail partner for its ‘connected partnership’, designed to enhance the shopping experience of customers through access to an additional range of Nike member-exclusive products and experiences.
In addition, Higginson said he was ‘pleased with the positive progress we are making in North America, and it is our intention to accelerate the rollout of JD in this important market as we believe it will deliver long term sustainable benefits’.
However, the outlook for the current year was lukewarm, with prices expected to rise just 5% and pre-tax profit seen growing just under 4% to £1.03 billion, despite plans to increase the store estate by between 250 and 350 new outlets per year to gain market share.
ANALYST STILL POSITIVE
Eleonora Dani at Shore Capital described the results as ‘remarkable’, saying they showed ‘continued progress across all areas of the business’.
‘Notably, organic sales at constant exchange rates exceeded the prior period by 12%, underscoring the company's strong performance. The second half of the year witnessed a significant improvement in trading, particularly in North America, as the supply of products from various international brands returned to normal levels.’
The analyst kept their buy rating, adding: ‘JD Sports Fashion's multi-brand and multi-channel propositions continue to serve as robust growth drivers for the company.’
‘This comprehensive approach, coupled with the company's international prospects, contributes to its ongoing success and expansion.’
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