Strong organic growth and improving like-for-like sales
JD Sports Fashion PLC, the UK’s leading retailer of sports and fashion brands, is poised to release its first-half 2024 results on Wednesday, 2 October 2024. The company’s recent second quarter (Q2) trading update has set the stage for what could be a resilient performance in the face of challenging market conditions.
​In Q2, JD Sports reported impressive organic sales growth of 8.3% and like-for-like (LFL) sales growth of 2.4%. This strong showing contributed to first-half organic sales growth of 6.4% and LFL sales growth of 0.7%, demonstrating the company’s ability to navigate global economic uncertainties.
​The quarter-on-quarter improvement was primarily driven by JD Sports’ robust multi-brand operating model and softer comparatives with the previous year. This performance underscores the company’s adaptability in a volatile retail environment.
​Investors will be keen to see if these positive trends have continued through the remainder of the first half, potentially setting the tone for the rest of the financial year.
Regional performance and segment growth
​JD Sports’ global presence has been a key factor in its success, with different regions contributing to the overall growth story. In the Q2 update, North America and Europe led the way in terms of regional performance.
​North America achieved a remarkable 13.7% organic growth and 5.7% LFL growth, highlighting the company’s strong position in this crucial market. Europe followed with 3.0% LFL growth, while the UK market showed material improvement compared to the previous quarter.
​All three main segments – JD, Complementary Concepts, and Sporting Goods & Outdoor – achieved LFL growth. The JD segment, in particular, benefited from new store openings to deliver 11% organic growth.
​The upcoming results will likely provide more detailed insights into these regional and segment performances, offering investors a clearer picture of where JD Sports’ strengths lie and potential areas for future growth.
Margin management and inventory control
​Despite the volatile market conditions, JD Sports has demonstrated a commitment to maintaining profitability through careful margin management and inventory control. The group’s gross margin for the period was 48.4%, down 30 basis points from the previous year.
​The first-half gross margin stood at 48.3%, just 10 basis points below last year’s figure. This relatively stable margin performance reflects the company’s ability to maintain good promotional discipline and proactively manage inventory levels.
​Investors will be looking for further details on how JD Sports plans to continue balancing growth with profitability, especially in light of ongoing economic pressures and changing consumer behaviours.
Strategic expansion and acquisition
​A significant development for JD Sports was the completion of its acquisition of Hibbett on 25 July 2024. This strategic move adds 1,179 stores to JD Sports’ portfolio, substantially strengthening its presence in the US market.
​The Hibbett acquisition is expected to enhance JD Sports’ brand relationships in the world’s largest sportswear market and contribute positively to the growth and development of its US business in the coming years.
​In addition to this major acquisition, JD Sports opened 85 new JD stores during the first half of 2024. Combined with the Hibbett acquisition and ongoing disposal of non-core stores, the company ended the first half with 4,506 stores, representing a net increase of 1,189 stores from the start of the year.
​The upcoming results presentation will likely provide more details on the integration of Hibbett and the company’s future expansion plans.
Outlook and financial projections
​While acknowledging the volatile global macro environment, JD Sports remains cautiously optimistic about its outlook for the rest of the year. Based on the first-half trading performance and accounting for an anticipated £15 million headwind due to a stronger British pound, the company has maintained its guidance range for profit before tax and adjusting items at £955 million to £1,035 million, on a pre-Hibbett basis.
​Investors will be closely watching for any updates to this guidance and any commentary on the potential impact of the Hibbett acquisition on full-year results.
​Additionally, while not explicitly mentioned in the trading update, shareholders will be keen to see if JD Sports maintains or increases its dividend payments in line with its historical practice of providing a growing dividend.
JD Sports analyst ratings
​According to LSEG Data & Analytics analysts are rating JD Sports as a buy with 4 strong buy, 6 buy, 1 hold and 2 sell with a mean long-term price target at 169.08p, around 10% above current levels (as of 1 October 2024).