On 31 May, the JD Sports (LSE:JD.) share price fell 4.7%. That was the day on which the company announced its results for the 53 weeks to 3 February 2024.
Details of its financial performance were due to be published two days earlier. Any delays to scheduled events, particularly with FTSE 100 companies that are supposed to be organised and well managed, usually upsets investors. But on this occasion nobody appeared too bothered and its share price increased 10.2% in the week leading up to results day.
And despite falling heavily on 31 May, the shares ended the week 5% higher.
Perhaps those who bought a few days earlier were expecting more impressive results. But I’m not sure why.
When the company announced it was delaying publication it gave a big clue saying: “The group’s board confirms that it expects the results to be in line with the guidance provided”.
No surprises
Adjusting for exceptional items, and comparing the 52 weeks to 27 January 2024 with the same period in 2023, revenue was 2.7% higher.
But operating profit fell 8.1% and earnings per share were down 9.1%.
The company blamed a lack of product innovation and a drop in promotional activity (in a wider market that was heavily promotional) for its disappointing performance.
However, its profit before tax (PBT) for the full year (£917m) was in line with analysts’ forecasts.
I suspect the tumble in its share price reflects some profit-taking after some speculative trading in the run up to the announcement, rather than fundamental concerns about the company.
For its 2025 financial year, the directors are predicting a PBT of £955m-£1.035bn.
The company continues to invest in its online presence and is due to launch a new website soon. But it still believes in the high street and opened 200 new stores during its 2024 financial year. A similar number is expected over the next 12 months.
Disappointing returns
To help woo investors, the company announced an increase in its dividend to 0.9p (FY23: 0.8p). But a yield of 0.7% is miserly and well below the FTSE 100 average of 3.8%.
However, JD Sports isn’t claiming to be a dividend stock. Instead, it’s retaining most of its surplus cash to help it expand.
Indeed, the company recently announced plans to buy Courir in Europe and Hibbett Sports in the US, for €520m and £899m, respectively. Both deals are subject to approval by competition authorities but, if concluded, will add nearly 1,500 stores to its existing footprint of 3,400 shops.
These acquisitions have the potential to transform the size and scale of the company’s operations.
During the year ended 31 December 2022, Courir made a profit before tax and interest of €47m on revenue of €610m. For the 53 weeks ended 3 February 2024, Hibbett reported net income of $103m and turnover of $1.73bn.
I like the ambition of JD Sports.
It wants to become “the leading global sports fashion powerhouse”. And its core business of tracksuits and trainers shows no sign of going out of fashion. It also has a strong presence in the sporting goods and outdoor apparel markets, which helps reduce its exposure to one particular sector.
Despite the risks associated with the retailer, I’m going to keep the company on my watchlist for when I’m next in a position to invest.
