JD Sports shares rise as retailer bucks high street woes to boost profit and revenue
JD Sports’ shares jumped today as it bucked the trend of struggling high street retailers to boost profit and revenue.
Executive chairman Peter Cowgill credited the shoe and fashion store’s focus on remaining relevant to its millenial and Generation Y consumers for its success, saying the firm is “obsessed” with its customers.
Shares rose 7.6 per cent to 572.20p as JD revealed a 15 per cent rise in profit and a six per cent jump in store like-for-likes.
Read more: JD Sports buys Footasylum in £90m deal
The figures
Profit before tax rose 15.4 per cent year on year to £339.9m for the year to the end of February.
Revenue rocketed, climbing 49.2 per cent to £4.72bn.
Net cash fell steeply, dropping 60 per cent from £309.7m in 2018 to £125.2m after a string of acquisitions.
However, JD Sports hiked its basic earnings per share 13 per cent to 26.9p, while its final dividend rose 5.1 per cent to 1.44p per share, pushing its total dividend for the year 4.9 per cent up to 1.71p per share.
Why it's interesting
JD doubled down on its bricks and mortar stores last year, adding 39 stores in Europe, including two in new market Finland, and opening a net 83 new JD stores with 78 of those in international markets.
It also snapped up the Finish Line brand in the US, converting them to have five JD stores operating by the end of the year.
The retailer said it is “not immune” to high street challenges, but credited growth in its core UK and Ireland Sports Fashion stores down to “an uncompromising focus, intensive management” and constant analysis of its product range.
Cowgill told Morning Wire that while online growth outweighs traditional store takings, both are essential to his firm’s strategy.
“No-one who get the same level of like for like sales in bricks and mortar because it’s a more traditional way of shopping,” he said. “But we are very confident in our stores, which is why we’ve opened even more of them.”
JD Sports spent £90m on buying Footasylum last month, weeks after ruling out a bid for its high street rival, and Cowgill said it expands the kind of demographic JD can reach.
“Footasylum has a different point of view – they are perhaps aimed at a slighter older consumer – and we thought there would be potential economic synergies in the back office – they are only two miles down the road,” he said.
Senior market analyst at City Index, Fiona Cincotta, said it is too early to tell if JD has put a foot wrong by buying Footasylum and fellow acquisition Pretty Green.
“There's every possibility that Peter Cowgill and his crew can successfully sprinkle the JD Sports magic on these businesses,” she said. “But investors will want to see more meaningful evidence that they can be turned around before adopting the same level of enthusiasm for what still look like surprisingly risky deals.”
Ian Forrest, investment research analyst at The Share Centre, pointed out that JD’s outdoor business, including Blacks and Millets, suffered a £4.3m loss after the summer’s heatwave.
“The company is battling with many of the same problems that face others in the sector, including rising costs and lower footfall on the high street,” he said.
“While the management have clearly got their retail offer right and are expanding into new markets the shares already trade on 16 times 2020 forecast earnings which is a premium to the sector, so they are no better than a ‘hold’ for now.”
Richard Lim, chief executive of Retail Economics, said: “These results show that standing out in a crowded market with exclusive products, a unique proposition and placing the experiences at the heart of the store is a winning formula in today’s digital age.
“Investment in the retail theatre in concert with digital integration has propelled the retailer to an enviable market position, translating into healthy financials.
“Despite the challenging conditions on the high street, retailers who continue to thrive are those that have embraced change, invested in digital and listened to their customers to keep products fresh and desirable.”
What JD Sports said
Cowgill said: “I am very pleased to report that the group continues to make excellent progress.”
He added that JD Sports “has the necessary agility to continue to exceed consumer expectations and prosper in an increasing number of international markets”.
“Given the significance of Easter trading to the overall result of the group and the change in the timing relative to last year, any announcement of like for like sales performance in the year to date would lack precision,” he said. “However, we are pleased with the continued underlying positive performance of the group and are excited by the major developments ahead.
Read more: JD Sports expects profit boost from international growth
"We believe that our acquisition of the Finish Line business in the United States, the largest market for sport lifestyle footwear and apparel and the home to many of the global sportswear brands, will have positive consequences for our long-term brand engagement whilst significantly extending the group's global reach.”