Shore Capital hails impressive first half from JD Sports

21st Sep 2023 08:40

(Sharecast News) - Shares in JD Sports Fashion surged on Thursday morning after the sportswear retailer beat forecasts with its interim results, with broker Shore Capital hailing "significant progress" as it reiterated its 'buy' rating on the stock.

Pre-tax profit totalled £373.5m in the six months to 29 July, down 2.6% year-on-year but ahead of the £370.6m consensus estimate, which Shore Capital said was testament to the company's "strong operational efficiencies".

JD Sports Fashion also maintained its full-year guidance. "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," Shore Capital said.

Nevertheless, a poor performance by peers has weighed on sentiment in the market. "Weaker updates and consequent downgrades in the sports sector have impacted JD's share price, resulting in the loss of the gains since its Capital Markets Day in February," the broker said.

Shares have only risen 3% since the start of 2023, currently trading at 10 times current-year earnings despite offering a double-digit free cash flow yield.

"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 as demonstrated by the statement today. 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."

The stock was up nearly 8% at 143.4p by 0951 BST.