Share Search
Visit the Share Search
You are here:
Exane starts JD Sports at 'outperform'
4th Oct 2019 14:49
(Sharecast News) - Exane BNP Paribas initiated coverage of JD Sports at 'outperform' with an 830p price target on Friday, arguing that it's a rare growth retailer in the UK.
"JD is the only FTSE 100 retailer in the UK, aside from Ocado, to enjoy material growth prospects," it said.
With more than 430 sports-fashion shops in the UK & Ireland, the company is physically fully mature in its home market, it said. However, online is adding growth incremental to the stores and JD's profitable presence with its eponymous chain in both Europe and Asia suggests the potential to triple its existing store base.
Exane said store openings still make sense.
"The company achieves gross profit densities more than double its peers and continues to post strong in-store like-for-like sales growth driven by share gains and the rise of the athleisure culture."
The bank expects operating margins to rise as international scale builds, driven by increasing sales densities, accretive apparel mix and more localised logistics. It also said that UK outdoor assets, which are relatively small but currently loss-making, also have the potential to become profitable with the implementation of centralised logistics.
The "big prize", however, lies in the US, where Finish Line's 520 stores saw margins decline for six straight years under prior ownership, Exane said.
It said upside risks include a favourable decision from the UK Competition and Markets Authority on the acquisition of Footasylum, while downside risks include a sharp consumer slowdown, perhaps possibly triggered by an unfavourable Brexit outcome.
At 1440 BST, the shares were up 2.1% at 749.83p.
"JD is the only FTSE 100 retailer in the UK, aside from Ocado, to enjoy material growth prospects," it said.
With more than 430 sports-fashion shops in the UK & Ireland, the company is physically fully mature in its home market, it said. However, online is adding growth incremental to the stores and JD's profitable presence with its eponymous chain in both Europe and Asia suggests the potential to triple its existing store base.
Exane said store openings still make sense.
"The company achieves gross profit densities more than double its peers and continues to post strong in-store like-for-like sales growth driven by share gains and the rise of the athleisure culture."
The bank expects operating margins to rise as international scale builds, driven by increasing sales densities, accretive apparel mix and more localised logistics. It also said that UK outdoor assets, which are relatively small but currently loss-making, also have the potential to become profitable with the implementation of centralised logistics.
The "big prize", however, lies in the US, where Finish Line's 520 stores saw margins decline for six straight years under prior ownership, Exane said.
It said upside risks include a favourable decision from the UK Competition and Markets Authority on the acquisition of Footasylum, while downside risks include a sharp consumer slowdown, perhaps possibly triggered by an unfavourable Brexit outcome.
At 1440 BST, the shares were up 2.1% at 749.83p.