21st Sep 2023 12:42
(Alliance News) - JD Sports Fashion PLC on Thursday once again proved that selling tracksuits and trainers is lucrative, as it defied a tough consumer backdrop to post improved first-half earnings.
While the FTSE 100 listing said it is "acutely aware" of the tough economic backdrop, it is in "good health" for now.
JD Sports shares were 8.1% higher at 143.77 pence each in London on Thursday afternoon.
The athleisure retailer said pretax profit in the 26 weeks to July 29 surged 26% to GBP375.2 million from GBP298.3 million a year earlier. Revenue rose 8.3% to GBP4.78 billion from GBP4.42 billion.
"Selling trainers and tracksuits can be big business and many people aspire to own the latest products. That said, these items aren't cheap and so just because someone wants something doesn't mean they can always afford it. JD Sports is aware of this situation and rightfully doesn't assume its goods will continue to fly off the shelf at pace. While it is good practice to be cautious, JD Sports' results still show a business in good health. Sales, profits and dividends are all up, it is investing in the business to support geographic growth, and it is finding new ways to keep customers happy and on its side," AJ Bell analyst Russ Mould commented.
One of the ways it could keep its customers on side is a loyalty scheme, which it is trialling in 10 stores in Manchester.
JD Sports explained: "It is very early days in the scheme but initial results are encouraging with a very positive reaction from our customers and brand partners. Assuming continued success, the next stage would be a programme rollout across the UK."
Mould labelled schemes such as that one as "easy wins for retailers".
It is not just the consumer that JD Sports is looking to keep on side. The company, whose shares are done roughly a third from a March peak, is looking to woo shareholders too.
JD Sports doubled its interim dividend to 0.30 pence per share from 0.15p.
JD Sports noted it returned to pre-pandemic levels of dividend cover, meaning the amount of profit that goes towards payouts.
The company explained: "During the pandemic, the group took a cautious approach with regards to dividend pay-outs so as to ensure that that cash reserves were maintained. As a consequence, in the aftermath of the pandemic, there was a disconnect between company earnings and dividend pay-outs.
"The board recognises that JD is a very cash generative business and is committed to further enhancing returns to shareholders whilst ensuring that dividend pay-outs sit alongside other near-term cash outlays such as the minority buyouts of ISRG and MIG, the impending Courir acquisition and then, further out, future costs associated with any potential acquisition of the non-controlling interest in North America."
There could be more returns on the way for JD Sports shareholders too, analysts at Shore Capital Markets commented.
"Although the statement did not explicitly mention share buy-back plans, the robust balance sheet and a sizeable increase in interim dividend suggest a strong focus on shareholder returns. Given the growth initiatives and projected store openings, it is likely that the group will continue to use its net cash judiciously to fund expansion alongside rewarding shareholders," the broker said.
Looking ahead, JD Sports said trading has continued in line with its expectations over the last seven weeks, expecting financial 2024 pretax profit to be in line with market expectations of GBP1.04 billion.
This would represent a more than doubling upside to its financial 2023 pretax profit of GBP440.9 million.
By Eric Cunha, Alliance News news editor
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