28th Mar 2024 10:41
(Alliance News) - JD Sports Fashion PLC's rallied on Thursday as a "sense of relief" swept through the City after the company backed profit guidance, handing shares a boost after they were sold-off following a January outlook cut.
Shares in JD Sports rose 9.2% to 126.95 pence in London on Thursday. They are down 21% year-to-date.
UBS said that despite the material cut in early 2024, investors were worried about another one with the trading update.
"Overall, we view today's trading update as a clearing event for the stock and with the level of short interest ahead of the update, we would a expect significant outperformance today."
Shore Capital retail analyst Clive Black said after the "disappointment" of the January warning today's statement makes for "grounded reading," with no further weakening in the 2024 full-year out-turn and, a firmer basis for financial 2025.
"Missteps have understandably hit the stock rating," he noted, but "we have a sense of relief and reiterate our 'buy' stance on JD stock."
The Bury, Lancashire-based, FTSE 100-listed sportswear retailer said like-for-like sales rose 4.2% on-year in the 53 weeks to February 3, and were up 8.4% organically on a constant currency basis. Total sales grew 3.6% to around GBP10.5 billion.
As a result, it expects full-year pretax profit before adjusted items to be in line with its guided range of GBP915 million to GBP935 million, but down from GBP991.4 million the year earlier.
In January, JD Sports cut its outlook to that range. In September, it said it expected to meet market expectations at the time of GBP1.04 billion. The guidance cut sparked a more than 20% slide in its share price on January 4.
"We made good strategic progress, opening 215 new JD stores, and focusing our effort on developing JD and enhancing EPS through taking full control of ISRG and MIG," said Chief Executive Officer Regis Schultz.
JD also outlined its initial financial 2025 profit forecast of GBP900 million to GBP980 million, while saying trading in the new financial year-to-date is in line with its expectations after seven weeks.
Schultz continued: "Looking ahead, the current trading environment remains challenging due to less product innovation and elevated promotional activity, especially online. We anticipate trading conditions will improve as we move through the year, helped by a busy sporting summer and softer comparatives with last year."
Black said assuming that this guidance is well-grounded, "we see this update as helpful and subject to delivery a basis for the stock to regain market faith and so re-rate."
"We believe that investor faith can rebuild, a key factor to any share price appreciation, given low market trust in the group's EPS figures," Black added.
"Get the bunting out in Bury," he concluded.
By Jeremy Cutler, Alliance News reporter
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