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13 Apr 2021
JD Sports Fashion : FY21 results - Buy

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JD Sports Fashion : FY21 results - Buy
JD Sports Fashion Plc (JD:LON) | 80.6 0 (-0.1%) | Mkt Cap: 4,137m
- Published:
13 Apr 2021 -
Author:
Ben Hunt, CFA | Kate Calvert -
Pages:
7 -
Reported FY21 PBT (IFRS 16) £421.3m, 3% ahead of January’s guidance for PBT of at least £400m (INVe £402m), which is a pleasing result given multiple periods of store closures. Unexpectedly, a 1.44p final DPS has been declared.
Performance driven by exceptional US growth in part helped by the US Government stimulus. A further 37 Finish Line stores were converted to JD (c.20% revenue uplift on average vs 10%-15% in the early ones), taking total US JD stores to 49 at year-end. For the 6 weeks of ownership, Shoe Palace contributed EBIT of £13.9m. The UK performance was solid with Outdoors returning to profit in 2H following the restructuring of GoOutdoors.
Net cash at year-end was £795m (net of £68.9m deferred Shoe Palace consideration) before the payment of £380m for acquisitions since year-end, and £125m of temporary benefits which should reverse in 1H.
Management’s IFRS 16 FY22 PBT guidance is £475m-£500m, reflecting a difficult start to the year with store closures, a full year profit contribution from Shoe Palace and the acquisition of DTLR in March. At least 40 new European JD stores are planned, 10 US ones plus 50 further badge flips (Finish Line to JD).
Upgrade FY22E/FY23E PBT by 5%/0%, reflecting the beat in FY21. This is offset by a higher tax rate as US earnings increase within the mix. FY22E/FY23E EPS increases by 0.7%/cut by 4%. Management is encouraged by trading year-to-date despite stores closures in a number of markets. Sales retention rates have been better with the UK c.90% (c.70% in lockdown 1) and Europe 80% (30-40% in lockdown 1). The US started the year with flattish LFL, with a stronger March as the stimulus cheques kick in.
Valuation (CY22E PE 22.4x) does not reflect JD’s strong cash generation and growth opportunity. We see a great opportunity to leverage its established US & European growth platforms, backed by a highly profitable UK business.