JD Sports counters retail gloom with global expansion, gym style push

By guest authors Tanishaa Nadkar, Shariq Khan from Reuters

JD Sports (JD.L), Britain’s biggest sportswear retailer, bucked retail sector gloom yet again, as it predicted full-year profit would meet expectations on strong sales from new stores and growing demand for gym wear by trendy youngsters.

Shares of the owner of Footpatrol and Cloggs rose as much as 4.4% after the company also said it was seeing “encouraging” like-for-like sales growth in its core sports fashion business, both in the UK and other global markets.

Caption courtesy by Reuters

JD Sports’ shares have gained 77 % this year as the company rides millennials’ fondness for athleisure products, helping it post estimate-beating annual earnings earlier this year.

The company has targeted millennials and Generation Z consumers – those born between the mid-1990s and the mid-2000s – who are driving the trend for athleisure, where gym clothes have become acceptable at work, school and on social occasions.

The company has also invested heavily in international expansion to drive growth. JD said it opened 29 new stores in the period to June 29, mainly in Europe, Asia-Pacific and Australia.

For the full year, the company said it was confident in delivering annual headline pretax profit at least equal to the current consensus market expectations of GBP 404.3 million (USD 508.12 million).

“We didn’t expect such high level of sales growth to persist, but it has,” Peel Hunt analysts said, calling the like-for-like growth highly impressive.

JD’s upbeat forecast comes against the background of the British retail sector’s ongoing struggles, mainly caused by weakening consumer spending amid uncertainty over Brexit, higher business costs and a shift to online shopping.

JD, which runs more than 2400 stores that sell brands including Nike, Puma and Adidas, has weathered the storm, thanks to its international footprint and a strong online presence.

In contrast, rival Sports Direct (SPD.L), majority owned by billionaire Mike Ashley, has struggled and recently failed to buy Debenhams and Findel.

“It’s likely they are going to pick up market share from other players,” Stifel Nicolaus analyst Eleonora Dani said, but added that it would be harder for JD to keep up the pace of growth in a challenging retail environment.

The forecast comes ahead of the company’s annual general meeting, where shareholders will vote over the re-election of Chairman Peter Cowgill. On Tuesday, proxy advisory firm PIRC recommended shareholders to vote against his re-election.

Reporting by Tanishaa Nadkar and Shariq Khan in Bengaluru; Editing by Rashmi Aich, Saumyadeb Chakrabarty and Alexandra Hudson.