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12 Jan 2022
Kicking off 2022 in style

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Kicking off 2022 in style
JD Sports Fashion Plc (JD:LON) | 82.5 -0.5 (-0.8%) | Mkt Cap: 4,228m
- Published:
12 Jan 2022 -
Author:
Okines Warwick WO | Muir-Sands Charlie CMS -
Pages:
7 -
Strong 2H-to-date sales drive 3-8% EPS upgrades
This morning JD provided a trading update for the first 22 weeks of 2H, reporting sales in like-for-like businesses up more than 10% year-on-year, implying a high-teens organic increase on a two-year stack. Gross margins remain stable on the elevated prior year base. As such, JD guided to full year Adj. PBT of ''at least GBP 875m'', ahead of our prior GBP 828m expectation. We raise EPS forecasts 8% for FY Jan-22 and 3% for Jan-23 onwards, with the latter reflecting initial guidance of flat profits for the year ahead. Whilst potentially conservative, like management we recognise macro uncertainties and cost rebuild as likely drags. Our DCF-based target increases slightly to 245p but, with better upside elsewhere, and trading on 18x CY23 PE (16x ex-cash), we stay Neutral.
Sales remain unconstrained by industry supply delays...
Sales momentum has remained strong through 2H22, up c.+17% on a two-year organic basis on our estimates, compared with +15% in H1. As such it is clear JD''s sales have not been constrained by tight inventory in the sportswear market. We put this down to 1) the company''s ''strategic'' partner status with key brands like Nike and Adidas, 2) its access to upcoming and resurgent brands e.g. On Running, to which it can direct customer interest and 3) disproportionally strong growth in apparel ahead of footwear, where availability is better. As such, we see consumer demand rather than supply remaining the key driver of revenues into FY23.
...though initial guidance for FY Jan-23 is stable yoy, reflecting multiple head- and tailwinds
In FY23 JD should benefit from the annualization of recent acquisitions (Deporvillage, Cosmos). Additionally there should, hopefully, be a full post-pandemic recovery in continental European and Asian operations. European profits were GBP c.50m lower than pre-pandemic in 1H22 alone, for instance. By contrast, though, JD estimates it has a GBP c.100m boost...