JD Sports see FY in line as strong demand boosts lifts H1 profits by 25%

21st Sep 2023 07:22

(Sharecast News) - Shares in JD Sports Fashion surged as the UK sportswear retailer said it was on track to deliver a 5% rise in annual profit after interim earnings rose by more than a quarter, driven by resilient sales of trainers and athletic leisurewear amid the cost-of-living crisis.

The company, which is investing £3bn to open 1,750 stores over five years, said it expected to post pre-tax profits of £1.04bn for the year to January 2024.

Underlying sales for the six months to July 29 rose 12% to £4.7bn, while pre-tax profit surged 25.8% to £375.2m. Strong footfall in Europe helped premium revenue grow 28% to £773.8m in the region, with organic sales growth of 27%.

"In the last seven weeks, trading across the group has continued in line with our expectations. At constant exchange rates, organic sales growth was 10%. In addition, we have continued to open new JD stores worldwide and are on track to meet our full-year store targets," the company said on Thursday.

Sales were driven by demand for Nike, Air Force One and Adidas Gazelle and Samba footwear.

"Alongside the larger brands, through our scale and global reach, we are well placed to support the global development of fast-growing brands and in H1 we saw particularly strong growth from New Balance and On Running," the company said.

"By quarter, we had a particularly strong Q1, helped significantly by much fuller brand availability year-on-year, especially in North America, but a softer Q2 driven also by North America, with June the slowest month. July was better, helped by strong 'back to school' trading in North America, and this more positive trading has continued since the period end."

In North America, both Foot Locker and Dick's Sporting Goods have warned on weak consumer demand and weaker margins.

"Given the challenging macro-economic environment, the steady outlook speaks volumes about the resilience of JD Sports' core consumers and the strength of its strategic initiatives," analysts ast Shore Capital said.

"While conscious of the macro backdrop challenges, we reiterate our 'buy' stance on JD due to its strong structural position: the company's robust balance sheet allows it to outinvest its peers, particularly in the US market."

"In our view, JD has demonstrated significant progress over the year in line with the plans set out at its capital markets day in February, with the group focused on building critical mass in Europe and reinforcing its corporate governance."

Reporting by Frank Prenesti for Sharecast.com