JD Sports sees FY profit ahead of market expectations after strong second half

JD Sports said on Tuesday that it expects pre-tax profit for the year to 3 February 2018 to be ahead of market expectations following a strong second half.

The retailer now sees profiting hitting around £300m versus market expectations of between £270m and £295m as the positive levels of performance announced in the interim results continued through the second half, including the Christmas period.

Like-for-like store sales in the second half to date across the combined sports and outdoor segments, including those in Europe, have been maintained at around 3%, with additional sales growth from both material growth in online trade and continuing overseas space expansion.

JD said the performance is particularly encouraging when considered against the challenging comparatives provided by the significant levels of sales increases achieved in each of the last three years.

Executive chairman Peter Cowgill said: "I am delighted to report that we have maintained our positive performance from the first half of the year which continues to demonstrate the capability and strength of our highly differentiated multichannel proposition.

"On behalf of the board, I would like to thank all our colleagues for their significant contribution in delivering this excellent performance."

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "The festive season was a test of mettle for retailers, and one which has highlighted the gulf between the strong and weak players in the sector. JD Sports falls into the former category, posting solid sales growth which has allowed the company to upgrade its profit forecast for the year.

"Performance was no means as stellar as it has been in recent times, but then conditions are tough on the high street right now, thanks to the financial pressure on the UK consumer. JD Sports was probably insulated to some extent by its purchase of Go Outdoors, as the December cold snap prompted shoppers to stock up on winter warmers.

"Today’s update is a bit thin on detail, in particular how online sales have added to the mix. However the profit upgrade is a clear signal that sales are going to fall through to the bottom line, and that’s the key takeaway for the market."

Accendo Markets analyst Henry Croft said: "While JD shares touched a fresh 7-month high shortly after the open, trading just shy of the 400p mark, the surge in online-only retailing competition (ASOS, Boohoo) remains a headwind for the traditional seller and is reflected in today’s share price action; JD shares are still trading at a distance from 2017 and all-time highs of 463.5p, from where they fell in June after the company failed to upgrade profit forecasts following a strong opening to the financial year. After learning a hard lesson last summer, might today’s upgrade be a reflection of confidence in the outlook, or merely an obligation to give markets what they want?

"The shares are shying away from the 400p mark as investors still need to know how much of this sustained sales growth has arisen via bricks and mortar and how much website sales contributed to sales, and subsequently whether further upgrades will be possible to help engineer the breakout required to revisit 2017 highs."

At 0840 GMT, the shares were up 7.9% to 394.50p.