Can Exhausted JD Sports Get Back In The Race With Interim Results?
Spreadex | Sep 07, 2017 11:00
The retailer has certainty had a workout in 2017. The first few months of the year were a dream. Its mid-January update was fantastic, the company claiming that annual pre-tax profit would be 15% higher than analysts had anticipated after it maintained the pace of its stellar first half in the final 6 months of the year.
This then led to remarkable set of full year results in mid-April. For the 12 months to the end of January, the company posted a whopping 81% surge in pre-tax profit to £238.4 million after sales rose by a third to £2.4 billion. Investors were understandably impressed, sending the stock more than 8.5% higher, with it at one point striking an all-time peak of £4.63.
From here the company settled into a nice rhythm, spending the rest of April and all of May trading between £4.40 and £4.50. However once June hit things started to go very, very wrong for JD Sport, with the stock seeing a fall even more dramatic than its first quarter rise.
There were multiple reasons why the stock plunged nearly 30% in the 5 weeks between 6th June and 13th July. The UK election result and political fallout caused issues for the wider market, while rising inflation and stagnant wages created a rather unpleasant atmosphere for the retail sector. Rumours of a Nike (NYSE:NKE)/Amazon (NASDAQ:AMZN) partnership only exacerbated JD Sports’ losses, which were made all the worse when the deal was confirmed at the end of June.
That Nike/Amazon announcement happened to coincide with JD Sports’ Q1 update. There the company warned that calendar differences, specifically the timing of Eid, meant that the firm’s like-for-like sales figures wouldn’t be ‘truly meaningful until the end of the first half’. JD Sports also highlighted ‘margin pressures’, and the strong comparatives it faces due to 2016’s Euros-boost.
Since then JD Sports hasn’t had much luck. A recovery in the second half of July had the legs cut from underneath it in August, causing the stock to fall all the way to £3. A positive note from Barclays (LON:BARC) has allowed a slight rebound, with JP Sports Fashion now at a current trading price of £3.29.
In terms of next week’s interim results, investors are going to be very interested in what kind of figures the company produces. Despite the overwhelmingly negative response to its June statement, JD Sports did state it was ‘on track to deliver a result for the full year in line with market expectations’ with the bonus of ‘significant’ online growth, meaning the summer sell-off may have been overdone.
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JD Sports Fashion PLC (LON:JD) has a consensus rating of ‘Buy’ with an average target price of £5.44.
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