JD Sports set for solid Q3

JD Sports Fashion will announce its third-quarter sales report on Friday 19 December, and dealers are anticipating a positive run up to Christmas.

A man shopping
Source: Bloomberg

JD Sports had a record first half, and the retailer stated that its full-year figures will come in at the top end of estimates. In the six months until 2 August pretax profits doubled and revenue rose by 27%, however the annual figures will very much depend on a strong Christmas.

The lion’s share of JD Sports’ 850 shops are in the UK, but the retailer has a presence in Spain, France, the Netherlands and Germany. International expansion is in the pipeline and the firm hopes to open ten overseas stores by January.

Despite the sluggish eurozone economy chairman Peter Cowgill stated the company is experiencing growth in all countries and ‘even in Spain’.  The gap between southern and northern Europe is widening, and if JD Sports can achieve growth in Spain the company can expand in the north of the continent with confidence.

Sports Direct International recently revealed a 4.7% increase in first-half profits – and as Chris Beauchamp stated, a strong presence in mainland Europe is needed.

The outdoor and camping store Blacks and Millets posted a 12% increase in same store sales in the first half. The division required restructuring over a number of years but it finally broke even last year on an annual basis, and is now moving towards profitability.

JD Sports sold its Bank fashion division in November for an undisclosed amount to a company which specialises in acquiring distressed assets. Mr Cowgill stated it was in the ‘best interest’ of the group and the share price rallied on the day of the announcement, which leaves me to conclude that shareholders were glad of the disposal. 

JD sports will report its full-year figures on 15 April, and traders are expecting sales of £1.46 billion and adjusted net income of £63.3 million. These forecasts represent a 9% increase in revenue and an 11% rise in adjusted net profit.

Investment banks are bullish on JD Sports, and out of the seven recommendations, six are buys ratings and one is a sell. The average target price is 11% above the current price. Equity analysts are also bullish on Sports Direct International – and out of the 12 ratings, eights are buys, three are holds and one is a sell. The average target price is 22% above the current price.

The share price has pulled back from the record high of £5.12, and any further moves lower are likely to find support at the 50-day moving average of 454p; strong third-quarter figures could drive the stock to £5.

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