- H1 PBT down 13.5%
- Full-year guidance maintained
- Second-half weighting a risk
Trainers-to-tracksuits seller JD Sports Fashion’s (JD.) first-half results showed a disappointing profits plunge in a weaker athleisure market.
However, shares in the FTSE 100 retailer ticked up 1.2% to 89.7p as it reiterated full-year guidance pointing to adjusted pre-tax profits of £878 million and said it expects ‘limited impact’ from US tariffs in the current year.
Potentially tempering enthusiasm for the stock was a suggestion from Panmure Liberum analysts that the sportswear retailer’s profits will be more second-half weighted than in prior years, which could leave JD Sports a hostage to fortune with market conditions remaining tough.
BUYING GROWTH
JD Sports’ results for the half to 2 August showed an 18% jump in revenue to £5.94 billion, driven mainly by the acquisitions of North American retailer Hibbett and French chain Courir and with the company winning market share in Europe and North America.
Unfortunately, like-for-like sales were down 2.5% in a tough footwear market with trading worsening in the second quarter, suggesting JD Sports’ turnaround may take some time.
Adjusted pre-tax profits for the half fell 13.5% to £351 million in challenging market conditions.
STAYING DISCIPLINED
‘In an environment of strained consumer finances and evolving brand product cycles, operating and financial discipline remains a core focus for JD, and we are controlling our costs and cash well,’ insisted CEO Regis Schultz.
‘Whilst we remain cautious on the trading environment for the second half, we expect limited impact from US tariffs this financial year, and our full-year profit before tax and adjusting items to be in line with current market expectations.’
Despite the tough market backdrop, JD Sports remains highly cash generative, which supports the interim dividend of 0.33p and this year’s second £100 million share buyback.
EXPERT VIEWS
Though it has a ‘buy’ rating on the stock, Shore Capital believes ‘investors await signs of a recovery in like-for-like sales, particularly in the key growth market of the US before the business will justify a re-rating’.
Begbies Traynor’s (BEG:AIM) Julie Palmer said JD Sports is hitting many of the right notes operationally - expanding its footprint, strengthening its brand presence in the US, and investing in its supply chain - but the retailer is still being heavily weighed down by weak consumer confidence.
‘With like-for-like sales down 2.5% in the first half and profits far from last year’s highs, this is a business doing the right things, just at the wrong time,’ said Palmer.
‘The good news is that tariff fears have eased and JD remains a key partner for global brands, with loyal customers and solid market share, but building the foundations now, in a slower market means that when the pace picks up it can come out sprinting. For investors, this remains a waiting game - confidence has taken a knock. Until the consumer recovers, JD may need to wait a little longer before it sees the full reward of its operational progress.’
