We continue to believe JD trading is fine A disappointing Q3 update from Foot Locker on Friday (22 Nov), with a pull-back in Q4/FY guidance. The company blamed a shift in launches, a tough Q4 comp with fewer Yeezy launches this year versus last, and weak apparel sales. Management also announced it would stop guiding quarterly. This followed a reasonable Q3 performance to the start of November. We would not be too hasty in assuming read-across from Foot Locker’s negative US Q4 guidance for JD Sports/Finish Line. While there are fewer Yeezy launches from Adidas this year, Finish Line’s sales were more biased to Nike and not as exposed to Adidas last year compared to Foot Locker. Its comp is not as tough (INVe Finish Line inc Macy’s 2H19 comp mid single-digit vs Foot Locker Group’s Q3 +2.9%; Q4 + 9.7%). Lead time are such that JD-bought stock only started coming into Finish Line stores from June, so we believe the business should be in a much stronger position this holiday season versus last year. We continue to believe JD Sports’ forecasts are firmly underpinned after a strong H1 performance with good momentum in all regions. Indeed, we believe risk to forecasts is on the upside. Valuation (CY20E PE 21x) does not reflect its potential to deliver sustainable double-digit earnings growth for the foreseeable future and strong cash generation, in our view. Foot Locker’s Q4 guidance disappointing after reasonable Q3 Foot Locker reported Q3 comp store sales +5.7%, with in-store +4.7% and DTC +11.4%. Gross margin improved 50bps and SG&A +10bps. It posted high-single digit comp gains in August/September’s back-to-school season and in October, the lowest volume month of the quarter, a low single-digit comp increase. By region, North America and Canada saw low double-digit gains with Champs, Foot Locker US seeing high single-digit gain. Footaction increased by low single-digits. Footlocker Europe saw low single-digit gains. By category, Footwear was up high single-digits, with apparel down high single-digits. Guidance for Q4 is for flat comp sales, which reflects the negative trends in its apparel business as well as last year’s challenging Q4 comp of 9.7% (Yeezy), gross margin down 10-30 basis points and mid to high single-digit growth in earnings per share. As a result, management’s FY expectations are now for comp sales up by a low single-digit amount (previously mid-single) and a mid single-digit EPS gain (previously high single-digit).