JD Sports is “a leading player capable of taking up market share,” according to Shore Capital.
Gross margins for sportswear companies will remain under pressure due to inflation and an uncertain consumer environment, with profits diluting because of higher sourcing prices and significant inventories increase.
“As companies look towards 2023, they expect a normalisation of market conditions but a continuation of the promotional environment,” the broker said in a note.
As a result, the analysts see two different strategies emerging.
Sportswear companies will either focus on sales growth and market share gains, taking a hit on profitability, or focus on profitability at the expense of sales growth.
Shore Capital believes that JD Sports, unlike most retailers, has the necessary balance sheet to pursue sales growth and profitability, believing it is in a “strong position to do so and succeed in the current market.”
Analysts at the Shore Capital reckon that Adidas potentially writing off its Yeezy stock could create an opportunity for other brands to fill the void, which should help JD Sports remain relevant.