There are no plans to reduce their number of stores, although the retailer is looking for more flexibility on its store leases.
JD Sports (JD.) shrugs off retail gloom to post growth
- Shares rise 5% in early trading as market welcomes latest results.
- Company reports 47% rise in revenue and 7% rise in profits while stating there are no plans to reduce number of stores.
- While the company sees growth, we maintain our ‘Hold’ recommendation, as much of the growth already reflected in the share price.
The sportswear retailer has beaten market expectations this morning and said it was looking for more fairness and flexibility on its store leases. The company reported a 47% rise in revenue, including a 10% increase in like-for-like sales in the UK. Pre-tax profit rose 7% to £129.9mn but the company said the adoption of a new accounting standard would limit its full-year profit to around £413mn. JD Sports said it was aware of the financial benefit other retailers were getting when they downsized their store chains, but it has no plans to reduce the number of stores it currently has.
The shares have had a very good year so far and the further 5% rise today clearly showed the market liked today’s news. The solid increase in UK sales and reassuring comments on the store network are good news for investors. Growth in Europe is also encouraging although the company is bringing forward plans to open a new warehouse in Belgium due to Brexit.
Our view on JD Sports - Hold
While the company is seeing some remarkable growth in the UK compared to its peers, and the acquisition of Finish Line in the US should provide more, much of that is already reflected in the share price and so the shares are no better than a ‘Hold’ for medium risk investors seeking growth.
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