JD Sports On Winning Streak As Biden Stimulus Cheques Fuel US Sales

JD Sports On Winning Streak As Biden Stimulus Cheques Fuel US Sales
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“JD Sports Fashion PLC (LON:JD)’s scoresheet has notched up plenty more wins as lockdowns have eased, with record earnings for the first half, cementing its position as a star on the retail sportswear scene, but supply chain issues could still trip up sales in the coming months.

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JD Sports' Sales Profit In The First Half

Profit before tax and exceptional items soared to £439.5 million for the six months ending July 31 from £61.9 million pounds in 2020 and £158.6 million pounds the year before.

Demand for trainers and the trend for althleisure wear shows little sign of going out of fashion. Casual styles are en vogue not just for free time but increasingly while at work too, with so many people still using their home as their office.

The sports leisure market in the US is huge and here JD Sports is stepping up the pace of sales, which will be key to future growth prospects. It’s already the group’s most profitable territory, thanks to multiple acquisitions and rebranding of stores. It’s also been a big beneficiary of the Biden bounce of stimulus cheques, with recipients splashing the cash on coveted sneakers and sportswear.

But ongoing pandemic restrictions, and a shift in shopping behaviour has meant footfall in stores remains weak in many key markets. Despite its slick operating model, and investing big in its logistics operation, it’s not immune to supply chain challenges. The administrative burden of Brexit has also disrupted performance in Western Europe which it is hoping to solve temporarily through a short term lease on a huge online order processing factory in Lille. Supply chain problems have caused a particular headache for the company’s outdoor brands with delays in bike and cycling accessories in particular, leading to shortfalls in stock.

Withholding An Interim Dividend

It’s because of these issues, that JD is withholding an interim dividend, with suggestions of a larger full year dividend. There is a risk that with such challenges playing out, a game of two halves could materialise with a weaker performance in the current six month period.

The first half results though will be a salve to the bruises JD Sports is still nursing following the competition ruling which could force it to sell Footasylum, just two years after the acquisition. The clock is ticking on providing alternative remedies to the sale, with views on the provisional ruling due by the end of the week, and it’s clear JD will try and fight tooth and nail to keep it within the family.’’

Article by Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)www.valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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