22nd Aug 2024 10:32
(Alliance News) - JD Sports Fashion PLC impressed analysts on Thursday, reporting sales growth perked up in the second quarter, boosted by double-digit organic sales growth in North America and Europe.
The Lancashire, England-based sports fashion retailer said like-for-like sales rose 2.4% in the 13 weeks to August 3, improving from a fall of 0.7% in the first quarter.
On an organic basis in the recent quarter, sales climbed 8.3%, with North America sales up 14%, and Europe and Asia Pacific up 11%. UK organic sales growth lagged at just 1.2%.
For the full first half of the financial year, like-for-like sales rose 0.7% with organic growth of 6.4%.
In response, shares in JD Sports were up 6.2% to 136.28 pence each in London on Thursday. It was the best performing stock in the FTSE 100 which was up 0.3%.
Peel Hunt said the update was "somewhere between reassuring to good, with [like-for-like] improving in all areas and material market share gains."
JD Sports Chief Executive Regis Schultz said growth was supported by the continued success of its JD store rollout programme.
"Based on our first-half trading, we remain on track to deliver profit within our full-year guidance," Schultz added.
This was despite a global macro environment that remains "volatile", leaving the group cautious on the outlook for the rest of the financial year, Schultz said.
Despite an expected around GBP15 million forex headwind, JD Sports expects full-year pretax profit before adjusting items of GBP955 million to GBP1.04 billion, excluding Hibbett. Adjusted pretax profit in financial 2024, which ended on February 3, was GBP917.2 million.
In April, the company bought US sports fashion retailer Hibbett Inc for an enterprise value of USD1.11 billion.
Birmingham, Alabama-based Hibbett operates 1,169 sports fashion stores across 36 US states, mainly under the Hibbett and City Gear brands. In the financial year that ended February 3, Hibbett recorded USD131.6 million in pretax profit on USD1.73 billion in net sales.
JD Sports said the overall market remains "volatile", but it had managed inventory to support gross margin. Despite this, gross margin in the quarter fell 30 basis points to 48.4%.
This decline was seen mainly in apparel and online, where the UK was the most impacted.
Peel Hunt said the the shift in LFL sales from negative 0.7% in the first quarter to plus 2.4% in the second, was a "good effort" given mixed industry trends.
"The US market notably stood out. With the comparative easing again, we expect LFL to continue improving. While a speedy pick-up in Nike’s form is unlikely, we anticipate other brands will prosper," the broker added.
Peel Hunt said while there are no changes to guidance today, it is reducing its numbers by 2% due to currency effects.
"That shouldn't detract from a very positive update, with key takeaways being continued market share gains and JD’s global presence making it the preferred partner for global brands."
"We believe the shares are seriously undervalued and reiterate our buy rating."
Barclays which has an 'underweight' rating on JD Sports said held guidance was "reassuring", albeit partly as comparatives have softened and now with a GBP15 million headwind due to the strong pound.
North America growth LFL growth is "eye catching", the broker remarked.
By Jeremy Cutler, Alliance News reporter
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