Shares in JD Sports Fashion (JD.) jumped 3.2% higher to an all-time high of 943p after the trainers-to-tracksuits seller resumed dividends and forecast higher profits for the year ahead, drawing confidence from the opening up of physical retail in the UK and the broader easing of Covid restrictions around the world.
To cope with booming online sales, and the challenges of Brexit, the casualwear-to-sportswear purveyor is investing heavily in logistics operations and has struck a warehousing and e-fulfilment services deal with Clipper Logistics (CLG) that was well-received on Tuesday.
RETAIL STAR TURN
Despite multiple periods of temporary store closures during a Covid-impacted year to January 2021, strong online sales helped the athleisure purveyor to retain ‘substantially all’ of the prior year’s record profitability.
Profit before tax and exceptional items came in at £421.3 million, just 4% below the previous year’s £438.8 million.
This modest forecast ‘beat’ was largely attributable to the US, where strong summer demand for sneakers created a stock shortage, thereby boosting gross margins across the pond.
JD Sports also pleased investors by resuming dividend payments, declaring a final payout of 1.44p which ‘recognises the significant contribution to profitability from the group’s international operations, particularly those in the United States’.
COWGILL REMAINS CONFIDENT
‘Whilst we must recognise the substantial level of temporary store closures to date and ongoing, we remain confident that we are well placed to benefit from the opportunities that prevail and, at this early stage, our current best estimate is that the group headline profit before tax for the full year to 29 January 2022 will be in the range of £475 million to £500 million,’ said executive chairman Peter Cowgill.
He believes that as the world begins to emerge from the worst of the pandemic, ‘JD is at the pinnacle of the global sports fashion industry’.
JD Sports has been busy with acquisitions in the US and Europe in recent months and having raised £464 million in February, further deals are expected to follow.
Cowgill added: ‘Our recent completed acquisitions of Shoe Palace and DTLR in the United States together with the conditional acquisition of Sizeer in Central and Eastern Europe are important steps in our evolution which will transform our consumer connection in these markets and further develop our key brand relationships’.
HEIGHTENED COMPETITION
AJ Bell investment director Russ Mould commented: ‘Online sales have helped to offset weakness from temporary shop closures and unsurprisingly success with the digital channel has put pressure on its warehousing capacity. That’s an easy fix by striking a deal with Clipper Logistics to provide related services.
‘However, what’s not fixable with a quick signature is dealing with heightened competition. Various shoe manufacturers including Adidas and Nike are now selling direct to consumers online, meaning JD has new rivals on the retail side.’
Mould also highlighted ‘a growing trend for product creators to skip the middleman and use the online channel to go directly to the end customer, as it could boost profit margins and enable them to better understand the consumer which could influence future product development.
‘JD may therefore have to put more emphasis on its physical stores as being unmissable showrooms and lean on the appeal of trying shoes on in the store.’
