1H24 PBT expected to be down YoY in-line with guidance. At its June AGM, management reiterated its view that trading was in-line with the then consensus FY24 PBT of £1.04bn and that the profit phasing between 1H:2H would be normalised with 1H c.35% of FY PBT. We forecast a 3% decline in 1H PBT to £372m. The back end weighted nature of JD’s opening programme means profits will be more 2H weighted. Also, by 2H, JD’s margins should benefit from annualising the higher promotional activity from elevated stock levels in 2H23 and October’s wage increase. Derby DC costs are more 1H weighted and there will be no stock clearance costs in 2H from closing South Korea in 1H24. Focus will be on the US performance, particularly after both DICK’S Sporting Goods (NYSE DKS) and Foot Locker (NYSE FL) cut earnings last week, by 6% and 35% respectively, although for different reasons. DICK’S was cost driven, not sales driven, impacted by shrink and the proactive decision to clear predominantly outdoor stock, a category JD does not compete in. Otherwise, we thought DICK’S call was upbeat on future industry dynamics and sustainability of double-digit margins. Foot Locker’s downgrade was due to weaker sales/higher cost from shrink and discounting to clear excess stock (see pg.2 for more detail) and it continues to underperform as the business resets in FY23. Current trading/stock levels will also be of interest, to see whether JD has seen a good start to the key US back-to-school season (DICK’S was upbeat, as others have been) and whether the 1H resilience in the UK/Europe/Asia continued. We expect JD’s inventory levels to be in good shape as management confirmed back in June and January that there were no issues. We expect previous guidance to be confirmed with risk of a downgrade very limited, in our view. The Group benefits from having a more geographically diverse earnings stream (FY23 Sports Fashion EBIT split UK 40%/US 37%/Europe 18%/Asia 7%) than its US peers. JD had already Continued overleaf