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13 Apr 2021
Still got love for the streets (and 15 questions)

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Still got love for the streets (and 15 questions)
JD Sports Fashion Plc (JD:LON) | 80.6 0 (-0.1%) | Mkt Cap: 4,137m
- Published:
13 Apr 2021 -
Author:
Okines Warwick WO | Muir-Sands Charlie CMS -
Pages:
8 -
Re-opening high streets set JD on course for strong profit growth in FY Jan-22
Full year adjust PBT fell just 4% year-on-year, and indeed rose 28% yoy in the second half to the end of January. Admittedly this was aided by some government support and a little MandA, but also by strong organic sales growth and tight underlying control of costs. Guidance for FY Jan-22 implies 13-19% growth in adj PBT with further upside implicit in outer years when pandemic disruption no longer impacts store closures. We revise our own EPS forecasts 0 to -8% but, offset by higher long term margin prospects, our DCF-based target price increases slightly to 920p (from 885p). Trading on 24x CY22 PE we retain our Neutral rating.
A strong second half, driven by USA in particular
We estimate organic cFX sales rose c.7% in 2H (to end January) in the main Sports Fashion division, despite the impact of off and on lockdowns in UK and several European markets from November onwards, since very strong online sales were able to offset store closures. Gross margin in the division rose 100bps in the year, and 275bps in 2H. This was strongly driven by the US where better retail disciplines were combined with a tight and less promotional market. Full year US gross margins rose 370bps yoy. Much of the easy margin opportunities here have now been delivered but management effectively raised its mid-term ambition for EBIT margins for the region above the 10% previously targeted (and achieved this year). Remaining levers include more disciplined store appraisals, double-digit sales uplifts on ''JD'' banner rebadges and apparel mix.
Confident outlook for the year ahead
JD has guided adj PBT of GBP475-500m (versus our prior GBP494m, Visible Alpha consensus yesterday GBP470m). This was implicitly a GBP30-40m upgrade from the view given in January, driven by stronger online trading during the latest lockdown than originally hoped for. For the remainder of FY22 management has indicated...