JD Sports posted a strong increase in its full-year earnings and sales driven by its sports fashion business. Here’s the City’s reaction.
“JD has had an extraordinary year, benefiting from a strong market backdrop. Several years of stores and infrastructure investment are starting to pay off.
“We believe there is more to come, with an exciting European roll-out opportunity and good growth potential in the UK, backed by attractive market dynamics.
“This is a business capable of delivering sustainable double-digit growth for the foreseeable future in our view and is well positioned in any European consolidation.” – Kate Calvert, Investec
“JD Sports sport fashion division remained undefeated for a second consecutive year, supported by its divergent range and product exclusivity, both reflecting the retailers’ strong relationship with its suppliers and improved buying and merchandising disciplines – representing a crucial key differentiator from its fierce rival Sports Direct.
“While it will be a challenge to maintain this level of growth in the longer term, we expect engaging retail theatre, improved visual merchandising and implementation of the latest digital technology in its newest stores will support an increase in average transaction values in 2016/17.
“The group has eagerly expanded its international presence, gaining traction across Europe having increased its JD fascia estate by 38 stores to 103, including a new larger flagship style store in Amsterdam. However, JD cannot avoid adverse currency volatility, so the group must stay mindful of the relative impact of international exposure on its total performance.” – Rebecca Marks, Verdict Retail
“We are fully alert that at some point Sports Fashion’s like-for-like sales growth will temper as consumers rotate out of the current trend for branded athletic footwear.
“We also are cognisant that the continuation of JD’s strong financial track record over the past 10 years will increasingly depend on international [in particular, Europe] success, which does not seem so assured as JD’s undisputed success in the UK.
“We nevertheless see scope for further outperformance relative to expectations, noting the outlook statement suggesting that the blistering like-for-like sales growth (albeit likely at a high single-digit rate) has continued into the first three months of FY17.
“The Outdoor business continues be loss-making and disappoints.
“We believe this business faces, possibly insurmountable, challenging issues to return to meaningful profitability, including oversupply, aggressive vertically integrated competitors, brands’ relatively weak product and distribution segmentation by retailer, weak price robustness, less demand- and style-driven consumer purchasing patterns, and overdependence on favourable weather conditions.” – Peter Smedley, Panmure Gordon and Co
“We see few reasons to believe that the strong growth will come to an end.
“It helps that JD’s chief domestic peer seems more inclined to get involved in spats than address its core problems, but JD deserves absolute full credit for what it has achieved in improving its service levels, merchandising and social media/online efforts.
“There will, of course, come a time when trainers cease to be the footwear of choice for the Hoxton mob but that feels a way off and we are beginning to sense a real structural change in the way that young adults behave.
“We believe that they have a far greater propensity to look after themselves and care about their appearance than their predecessors and this clearly is a positive for sales of sports kit. We believe this will absolutely persist into the long term.
“The Euro 16 football championships will be another boost to football sales, albeit a one-off.” – Jonathan Pritchard, Peel Hunt