Sports, fashion and outdoor brands star turn JD Sports (JD.) jumps another 4.3% higher to £13.90 as half-time figures reveal a forecast-busting 66% surge in underlying profit before tax to £77.4 million. Yet another record half-year result is delivered on further strong like-for-like sales growth as the Bury-headquartered retailer rides a boom in casual fashion.
Click here to read the interim results statement in full. Besides the aforementioned stunning profits jump, JD Sports Fashion's highlights include a 20% sales surge to £970.6 million, a 4.2% dividend hike to 1.25p and a net cash balance in excess of £200 million, giving the retailer a strong base to fund its international expansion drive.
Significantly, operating profits in Sports Fashion grew 53% to £79.9 million, like-for-like sales in these fascias (JD, Chausport, Sprinter) growing by around 10% despite three previous years of strong comparatives. 'Whilst it would be unreasonable to expect organic growth to continue at these levels, JD does have a very strong base from which to exploit ongoing opportunities both in its core UK market and, increasingly, internationally,' says the FTSE 250 constituent, also reporting narrowed losses in its Outdoor business.
Peter Cowgill, executive chairman, comments: 'Given that last year's result was in itself a record for our group then to increase this by a further 66% has exceeded reasonable expectations. The favourable trends for athletic inspired footwear and apparel in Europe have continued into this year. We are very much at the centre of this market with our success being a positive consequence of the investments we have made over a number of years to develop the JD retail concept.'
Addressing the consequences of Brexit, JD Sports Fashion insists that 'although the UK's vote to leave the European Union means that there will be some uncertainties over the next two or three years, we have no doubt that we have the support of our brand partners to continue our expansion in Europe and beyond.' However, sterling's weakening against the US dollar 'may cause some headwinds on margin in 2017', since prices may have to go up to offset higher sourcing costs.
Cantor Fitzgerald Europe's Freddie George upgrades his full-year taxable profit forecast by almost 20% to £200 million following these numbers. 'The stock is still undervalued, in our view, and has failed to catch up following a period of consolidation over the last six months, with recent earnings upgrades,' writes George. 'There are no signs of any concerns on the horizon, the key brands remains supportive and the strategic changes planned by competitor, Sports Direct (SPD), are not likely to impact over the medium term.'
George is thus 'confident that the positive momentum in earnings can continue and the company now has the balance sheet to make a meaningful aquisition. We reiterate our buy recommendation and raise our TP to 1700p from 1400p to reflect our earnings upgrade.'
Peel Hunt meanwhile upgrades its price target from £15 to £16.50, writing: 'It seems impossible to keep up with JD these days: here is another set of numbers miles ahead of forecasts and we are upgrading yet again (to a level they'll doubtless beat!). It's all down to excellent LFL in the core business (in the UK and overseas): sales densities are now 42% higher than they were three years ago.'
The broker assumes 'much more modest growth in H2 but our headline PBT will, barring any funny business at the analysts' meeting, go to £205 million (from £190 million), next year's from £210 million to £225 million.'