Focus on acquisitions as JD Sports expects sales and profit growth
JD Sports is expected to post rapidly rising profit and revenue next week, as the City watches for updates on its acquisitions of Finish Line and Footasylum.
Consensus estimates predict the retailer will report annual revenue of more than £4.5bn and profit before tax of £349.2m.
Analysts at Shore Capital said the double-digit profit growth was rare for the retail sector.
“We have been highlighting for some time that JD has several growth levers that continue to give the business momentum and double-digit earnings growth potential,” they said.
The group is expected to give more detail on its takeover of Footasylum, which it agreed last month in a deal valuing the company at more than £90m. Footasylum was founded in 2005 by David Makin, one of the co-founders of JD Sports.
It focuses on the footwear and apparel markets, targeting a younger trend-led consumer. Its acquisition could help JD Sports to reach a wider market.
On Friday, the offer for Footasylum was declared wholly unconditional after it received widespread shareholder support.
Peter Cowgill, executive chairman of JD, said: “We believe the combination of these two complementary businesses will deliver significant operational and strategic benefits going forward.”
Investors will also be watching for an update on the group’s US operations following its acquisition of Finish Line last year.
It has been running some trials of rebranding Finish Line stores as JD, as well as evaluating the health of the store estate.
However, analysts at Berenberg said the value of the whole company was not dependent on the success of the US acquisition, due to its underlying strength.
“Put simply, JD offers more of the top-selling products that consumers want, and it complements this with products and styles that customers cannot buy anywhere else,” they said.
“This has fuelled JD’s impressive acceleration of growth, and is a reason why the company has not had to rely on discounts to expand.”
They added that even if the planned turnaround of Finish Line fails, there is limited risk that it could become a major drag on the group’s performance.
Shares in JD Sports were changing hands for 513.6p on Friday lunchtime.
JD Sports also acquired the Pretty Green brand, founded by former Oasis frontman Liam Gallagher. The brand was placed into administration last month and the sports chain bought the brand, e-commerce site and Manchester flagship store for an undisclosed sum. However 11 stores and 31 House of Fraser concessions were closed as part of the deal.