Another strong quarter from Nike bodes well for JD Sports Last night, Nike announced a good Q2 performance, benefiting from attractive innovation. Nike’s group Q2 revenues increased 10% on a reported basis and 13% at constant FX. Nike’s Q2 brand revenues were up 12% at constant FX. Management commented that, on a currency-neutral basis, the outlook for FY20 continues to improve and it now expects currency-neutral revenue growth approaching the low double-digit range. In JD’s key regions, Nike’s Q2 US sales were up 5% (1H +4%), with footwear up 8% (1H +6%) and apparel up 1% (1H 1%). Its Europe, Middle East and Africa sales were up 14% at constant FX (1H +13%), with footwear +12% (1H 12%) and apparel +17% (1H +13%). Nike highlighted that its North American growth was driven by “Nike Direct and through differentiated wholesale partners, like Foot Locker, JD, Finish Line and Dick's.” With c.65%-70% of JD’s Finish Line sales mix being Nike, this suggests that Finish Line continues to trade well. Nike guides to 2H US comparable sales growth in the strong mid-single digit range. In Europe, Nike management talks about “extraordinary momentum in EMEA, and we expect to extend our lead fuelled by the Euro champs and the Olympics over the second half of fiscal year 2020 and into fiscal year 2021”. Positive update expected from JD Sports on 10 January with risk to forecasts on the upside Nike’s update supports our belief that the market for athleisure remains strong. We suspect the strong momentum that JD saw in 1H20 has continued into H2. JD Sports shares have rallied strongly along with its peers and are trading above our target price. We will review this when JD publishes its Christmas trading update on 10th January given that we believe risk to forecasts is on the upside. In our view, JD’s valuation can be justified by its strong cash generation and the potential to deliver sustainable double-digit growth for the foreseeable future given its multiple long-term growth opportunities. This is helped by its strong Brand relationships and unique elevated proposition which dovetails well with the Brands’ own strategic direction.