Clothing sales offset a weak footwear market as the sportswear retailer kept its full-year targets intact.
JD Sports Fashion (LSE: JD) shares barely moved on Wednesday despite underlying pre-tax profit falling close to 20% in the first half, as investors took comfort from management sticking to its full-year guidance. The FTSE 100 sportswear group reported underlying pre-tax profit of £282m for the 26 weeks to 1 August, down from £351m a year earlier, with total sales dipping 0.7% to £5.9bn and like-for-like sales down 2.8%.
The muted share reaction, with the stock off less than 1%, suggests the market had already braced for a soft set of numbers following JD's guidance cut in August. Reiterating the £700m to £800m underlying pre-tax profit target for the full year appears to have been the key factor preventing a sharper sell-off, even as gross margins came under pressure from pricing investment, particularly online, in a heavily promotional market.
The results laid bare a divergence within JD's product mix. Apparel and accessories, now representing 36% of sales, grew around 4%, while online sales rose 5%, together cushioning a roughly 3% decline in footwear that the company attributed to major product ranges reaching the end of their lifecycle. North America, JD's largest market, proved the weakest spot, with trading deteriorating further in the second quarter.
Statutory pre-tax profit rose sharply year-on-year, but the company was clear this reflected a smaller finance charge compared with the prior period rather than any underlying improvement in trading performance. More encouraging for shareholders was the balance sheet transformation, with JD swinging to net cash of £168m from a net debt position a year earlier, alongside a 21% increase in the interim dividend and continuation of its £200m share buyback programme.
With guidance unchanged since the summer downgrade, attention now turns to whether the apparel and online growth can keep outpacing footwear declines through the crucial second half, and whether North American trading can stabilise. JD remains, in essence, a recovery story still finding its footing.
This report is based on JD Sports Fashion’s announcement and coverage by UK Investor Magazine. Company announcements can be tracked via London Stock Exchange RNS and Investegate, and the full markets calendar is worth watching for the next update.
This article is for general information only and does not constitute investment advice or a recommendation to buy or sell any security. Photo: Craig Lovelidge on Unsplash.
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