Retail star JD Sports Fashion (JD.) has won another round of earnings upgrades following forecast-busting, record full year results. This is one retailer going from strength to strength and taking market share from competitors.
Encouragingly, the core JD fascia outlets continue to ride a Europe-wide boom in athletic inspired footwear and clothing. As the self-styled King of Trainers, JD is fast winning new investor fans, the share price sprinting 12.2% higher to 456.2p.
WINNING RUN
Click here to read today’s statement from JD Sports, a business on the up in stark contrast to troubled rival Sports Direct International (SPD). This shows another record year with numbers ahead of raised expectations.
Driving the earnings beat is the core Sports Fashion business, which delivered a third consecutive year of double digit store like-for-like growth. ‘The young are more interested in fitness and comfort,’ says JD Sports’ confident Chief Financial Officer Brian Small, ‘and we don’t see the trend shuddering to a halt.’
Investec Securities also attributes JD Sports’ success to ‘its continuous cycle of investment into format, retail practices, customer engagement and brand relationships’. The retailer’s international store roll-out is also gathering pace; market share in mainland Europe remains small, so there’s plenty of growth to go for, an entry into Malaysia has been successful so far and a first JD store in Australia opens shortly.
OUTDOOR PROGRESS
A major milestone for the group, JD also saw a profitable outturn in its Outdoors division for the first time, swinging from losses of £4m to an operating profit of £1.2m. The turnaround of the Blacks and Millets chains reflected lower levels of discounting, a more simplified operational management structure and an improved camping proposition.
However, November’s complementary Go Outdoors acquisition remains under review by the Competition and Markets Authority (CMA). Integration of the out of town retailer has yet to begin as JD is obliged to run the business separately from its other Outdoors formats until the CMA’s review completes.
WHAT THE ANALYSTS ARE SAYING
Urging clients to ‘buy’, Shore Capital’s retail expert George Mensah writes: ‘Our thoughts are that JD is a retailer with an outstanding and well-defined proposition, as demonstrated by the financial progression during the year. No guidance has been provided thus far but we would expect to upgrade our forecasts for financial year 2018 and beyond, we remain bullish on the company as we believe it is one of the strongest plays in the retail sector.’
‘We continue to see upside risk to forecasts given the strength of trading, store openings and investments into the JD proposition,’ writes Investec Securities, whose target price rises to 450p to reflect today’s upgrades.
