JD Sports: Can London’s retail success story keep making investors happy?

JD Sports is one of those rare companies that can act as a bellwether for an entire industry.

Along with Next, JD Sports’ results can give a detailed insight into the state of the UK’s retail and fashion industry – whether that be its successes or failures.

From its eye-catching forecast of £1bn in profit, which it ended up missing by less than £9m, to its revenue marching past £10bn, JD Sports has been as close to a sure thing for a good return on investment as it’s possible to have been in recent years.

However, with success comes increased expectations and the pressure to continue to perform highly and please investors.

One major way to do that, of course, is to keep on paying out hefty dividends.

JD Sports’ success paying off for investors

Despite JD Sports’ profit before tax and adjusted items falling from £991.4m to £917.2m in the year, the group still put aside more than £50m to pay out to its shareholders.

Despite being listed on the London Stock Exchange, JD Sports is 51 per cent owned by Pentland Group, the giant behind brands such as Berghaus, Lacoste, Speedo and Canterbury of New Zealand.

Other major shareholders who benefitted from the group’s latest success include BlackRock, Fidelity, Norges Bank and Vanguard.

What about shorter-term investors?

According to experts at Peel Hunt, there is nothing in JD Sports’ results that would put off a marginal buyer.

They added that the group’s plans in the US and Europe are “compelling” and that while its shares “continue to reflect bad rather than good news ahead” Peel Hunt said that “offers a very good opportunity”.

Following the publication of JD Sport’s results, shares in the Greater Manchester-headquartered group fell by around 10 per cent to c.120p each.

They ended 2023 at almost 166p each while the price is way down from its Covid-19 pandemic height of 233p in November 2021.

‘It may not go down as a vintage year’

Peel Hunt argues that while JD Sports’ latest 12 months” “may not go down as a vintage year”, it has made many investments to “build for the future” such as £100m in wage increases.

The firm adds: “Whilst like-for-like in the red is not easy on the eye, Q1 was always likely to be difficult given the touch competition and this is in line with management expectations.”

Peel Hunt also says that it sees “masses of value” in JD Sports’ share price and that they should “continue their momentum”.

What has JD Sports said?

In an update to the London Stock Exchange, chief executive Régis Schultz said: “In the period, we again outperformed the market delivering organic sales growth of nine per cent and premium sports fashion organic sales growth of 11 per cent.

“This strong revenue performance was delivered in a challenging market, particularly through our peak trading period.

“We made important strategic progress: putting the JD brand first through opening over 200 new JD stores; strengthening our complementary concepts through the proposed acquisitions of Courir and, announced after the period end, Hibbett; simplifying the group by taking full control of ISRG and MIG and divesting non-strategic businesses; building the right governance and organisation for a global group of our size; and investing in our people and infrastructure to deliver our growth strategy.

“I would like to take the opportunity to thank our people throughout the business for their hard work in delivering another year of market outperformance.

“We have started the new financial year with Q1 in line with our expectations in a volatile market and we are on track to deliver our profit guidance for the full year.

“Looking further ahead, we have a strong business model and a clear strategy to deliver long-term growth and value creation for our shareholders.”

What does the future hold for JD Sports?

In its latest accounts, JD Sports said it remains “focused on delivering our ‘triple-double’ of double-digit sales growth, double-digit operating margin and double-digit market shares in our key markets”.

On its target for double-digit sales growth, the group said it made a good start in the first year, delivering organic sales growth of nine per cent “in what ended up being a challenging and volatile market”.

JD Sports added that with the “positive impact” from the proposed acquisitions of Courir and Hibbett to come, “we remain confident of achieving this target”.

On operating margin, JD Sports said its target is to reach and maintain a double-digit operating margin within the course of its plan.