17 May 2023
If you are covering JD Sports’ full year results, please find below a comment from Mamta Valechha, equity research analyst at Quilter Cheviot:
“Despite some tricky headwinds in the past year, JD Sports cemented itself as the largest quoted non-food retailer in the UK with full year profit coming in slightly ahead of guidance. Even with a cost of living crisis and inflation soaring during the period, the Group managed to increase organic sales by 12%, with a particularly strong second half of the year as stock levels began to return to their normal levels and supply chain issues eased. Rebranded shops Shoe Palace and DTLR also excelled.
“The business did see some pressure on its margins in the US as that market became more promotional, while in the UK profits were hit as the excess Adidas stock swirling around the global market meant that margins were under some pressure, along with the return of business rates charge. However, JD Sports is a global business now and it saw Europe recover strongly post pandemic, which made up for any weakness in the UK performance.
“Current trading has also been quite strong with organic sales up 15%, and the US outperforming (+25%) given that that this time last year the region was dealing with low stock levels. This will normalise going into the second half of the year as consumer spending becomes more challenged and the effects of the last 12 months begin to bite. However, JD Sports remains a growing business in the face of challenging markets, with growth in the UK in the high single digits, while Europe and Asia Pac sales is high teens.
“At its current valuation we think the market continues to underestimate the strong proposition JD Sports holds in the attractive sportswear sector, and these results are testament to the quality of business it has become over the years.”
