17th May 2023 12:43
(Alliance News) - Despite achieving a "remarkable" set of annual results according to analysts at Shore Capital, shares in JD Sports Fashion PLC slumped to the bottom of the FTSE 100 on Wednesday.
The stock was down 6.1% at 159.90 pence on Wednesday afternoon in London, the worst blue-chip performer.
The sportswear retailer said revenue rose by 18% to GBP10.13 billion in the financial year that ended January 28 from GBP8.56 billion the year before.
This beat the revenue forecast by Shore Capital Markets of GBP9.67 billion and, for interactive investor's Victoria Scholar, demonstrated that JD Sports had defied "doom-and-gloom" in the face of the cost-of-living crisis and cost inflation pressures.
"JD Sports, which describes itself as the 'King of Trainers' is defying the doom-and-gloom, on track to see earnings top GBP1 billion for the first time this year as its collection of sports fashion clothing and shoes including brands like Nike, adidas and Puma, continues to chime with consumers," she said.
However, JD Sports said pretax profit fell by 33% to GBP440.9 million from GBP654.7 million.
The lower profit was due to higher adjusting items, "principally [related] to a non-cash movement in the present value of future put and call options held with minority shareholders in certain subsidiary businesses and losses incurred in divesting our non-core branded fashion businesses", JD Sports explained.
Operating profit fell 29% to GBP509.8 million from GBP721.2 million.
Russ Mould, investment director at AJ Bell, said that there was little to get the stock moving upwards on Wednesday as JD Sports still has "work to do" and "considerable sums to spend" to meet its "ambitious" goals for growth.
"JD is demonstrating the strength of its brand and its successful capture of the under-25 demographic as it enjoys resilient sales. However, it needs to be wary of any shifts in consumer preferences. Fashion is by its nature cyclical and a move away from the athleisure trend would be unhelpful to JD.
"The company must hope that its target market, potentially insulated from cost-of-living pressures if they still live at home, continues to enjoy a decent level of disposable income and that its relationships with core brands like Adidas and Nike remain strong as they pursue direct-to-consumer strategies," Mould said.
Looking ahead, JD Sports expects to meet current average market consensus expectations for adjusted pretax profit of GBP1.03 billion in financial 2024, which would be up from GBP991.4 million achieved in financial 2023.
Chair Andrew Higginson said: "The group is reassured with trading to date in the new financial period with growth in organic sales at constant exchange rates of more than 15% after 13 weeks. This performance is further evidence that consumers worldwide are more attracted than ever to JD's differentiated proposition with its attention-grabbing in-store experience, breadth in the range of brands and availability of key styles."
By Heather Rydings, Alliance News senior economics reporter
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