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02 Sep 2021
First Take: JD Sports Fashion - Preview 1H21 results – 14th September

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First Take: JD Sports Fashion - Preview 1H21 results – 14th September
JD Sports Fashion Plc (JD:LON) | 80.6 0 (-0.1%) | Mkt Cap: 4,137m
- Published:
02 Sep 2021 -
Author:
Ben Hunt, CFA | Kate Calvert -
Pages:
4 -
Better-than-expected updates from peers suggest a strong JD performance is likely
All eyes are expected to be on the US when JD Sports reports its 1H results to see how strong Finish Line/JD performances have been and how the recent Shoe Palace (acquired December) and DTLR (acquired mid-March) acquisitions are performing. Recent better-than-expected results from both Foot Locker and Dick’s Sporting Goods as well as Nike suggest US demand for athleisure has been strong, benefitting from Government stimulus, and all players suggest a positive H2 outlook. This bodes well for JD with upside risk to FY forecasts most likely to come from the US, in our view.
The UK is likely to have delivered a robust performance versus FY20, despite H1 trading affected by store closures during lockdown 3 from the beginning of January to 12 April in England and Wales, with Scotland and Northern Ireland reopening at the end of April.
European performance is expected to be the weakest, reflecting store closures, lower online penetration, and generally weaker footfall/demand. The acquisition of MIG in Central Europe (May) and Deporvillage in Spain (June) should benefit 2H.
Forecasting 1H results with any accuracy is complicated by different trading patterns year-on-year, store closures and last year’s weak comps when most stores were closed from mid-March to mid-June followed by strong pent-up demand, particularly in the US. We forecast 1H22E IFRS 16 PBT of c.£240m with risk to our FY22E PBT of £558m on the upside (Factset FY22 PBT consensus £585m with top end £650m), in our view, given recent trading updates from other retailers.
Reiterate BUY; strategic update due with CMD on 13th October
Valuation (CY22E PE 22.9x) does not reflect cash generation or its growth prospects. We expect JD Sports to emerge strongly from the pandemic with a step change in earnings, helped by a number of recent acquisitions/historic investments. With more acquisitions set to come (net cash c.£500m and c.£1bn debt facility), we believe JD Sports is well positioned to continue its double-digit growth story for the foreseeable future. A CMD on 13 Oct will give investors the opportunity to hear from the wider management team when it provides a strategic update.