JD Sports Fashion PLC (LSE:JD.)’s sale of brands to Frasers is the first sign of new CEO Regis Schultz making a clear strategic impression, reckons Shore Capital.
The broker kept its 'buy' rating on JD, with a target price of 118p.
Analysts at the firm said the divestment may have raised an eyebrow or two, but on the “surface looks like sensible activity".
The decision to sell the assets, including Pretty Green and Cricket, for £47.5m would have come after a strategic review.
Shore Capital believes JD will not release brands and activities where there is strong complementary growth potential.
JD added in Friday’s announcement that it has plans for international core and digital expansion.
“We believe JD is a high-class business which is set around strong core brands, excellent supplier relations, good execution, and a clear understanding of its core customers,” said Shore Capital.
“We also believe that the group's equity is one that can re-rate with macroeconomic stabilisation.”
On Frasers, Shore Capital also said it has a 'buy' recommendation, with its purchase an interesting one as it hoovers up a wide range of assets and companies, from Arena Coventry to Flannels.
Shore Capital said that Frasers needs to “show the real value in the broad portfolio of companies, labels and brands that now feature within its stable to make sure that there is more virtue than legacy.”
JD confirmed the sale of 15 of its UK-based non-core businesses to Frasers, adding the divestment will allow it to focus more opportunities across the rest of the group.