JD Sports, the UK’s largest sportswear retailer has given investors a boost by posting record annual profits. The positive news has seen the company’s share price leap by almost 8% today, continuing a very strong start to 2019. The stock has now gained 67% since bottoming out on December 18th last year.
Recent times, particularly the last several months, have seen investors with exposure to the retail sector in general, and the high street in particular, hit hard. Sports Direct, B&Q owner Kingfisher and Dixons Carphone are just some of the publically-listed retailers that have been hit by hard times. Even online retail, previously in a seemingly perpetual growth cycle, has suffered with the share price of Asos and Boohoo.com plummeting late last year and struggling to recover.
However, unlike many of its peers, particularly arch-competitor Sports Direct, JD Sports has bounced back strongly. The company posted a 15% rise in pre-tax profits and revenue soared by 49% to £4.7 billion. The company’s stores in Europe and Asia were highlights, with like-for-like sales showing double digit growth. Over the whole group the figure came out at 6%.
Even in the UK and Ireland the company succeeded in growing both sales and profits. However, executive chairman Peter Cowgill was careful to stress that despite the strong year JD Sports has not been immune to the challenging environment represented by the UK high street retail sector. He mentioned the twin tailwinds of lower footfall and increasing labour costs. Despite these challenges JD Sports still generates around 60% of its overall profits from the UK and Ireland market and 30% from Europe. The remaining 10% comes from its small but growing operations in Asia and the USA.
2018 was JD Sports’ first move into the U.S. market, achieved through the £400 million acquisition of local sports footwear chain Finish Line. Early results from the 1100 stores across the USA and Puerto Rico are said to be encouraging and the company has wider international ambitions. Five JD Sports-branded stores have also been opened in the USA, 4 of which were conversions from existing Finish Line outlets. Of the total 83 new JD Sports stores opened over the year ending February 2nd, 78 were in international markets.
Analysts have been impressed by the full year results with several upgrading JD Sports from a ‘hold’ to ‘buy’ recommendation. Shore Capital wrote in a note to investors that the company is showing:
“continued momentum across the board”.
And that it represents a:
“multi-brand and multi-channel proposition as continued growth engines for the company, together with international prospects”.
Please remember that financial investments may rise or fall and past performance does not guarantee future performance in respect of income or capital growth; you may not get back the amount you invested.
There is no obligation to purchase anything but, if you decide to do so, you are strongly advised to consult a professional adviser before making any investment decisions.