JD Sports Fashion will benefit from Nike’s direct-to-consumer strategy, said Shore Capital, after a host of its peers, reported this week.
The broker believes JD Sports should benefit from the vacuum created by Nike selling DTC.
While Nike is reaping the rewards of its new strategy, with 40% of revenues coming from direct sales, the plan has left space for retailers that the Swiss brand, On, and other smaller brands are taking.
Brands still require the FTSE 100 retailer’s physical presence to showcase products and stay relevant to consumers.
JD Sports remains Nike’s partner of choice, but “it does also benefit from other brands like On and New Balance’s success.”
“Ultimately, a healthy sports market with strong competition to market leader Nike is beneficial, as it encourages new product pipeline and innovation,” said Shore Capital.
The retailer’s strong balance sheet, with projected net cash of £2.4bn by 2024, also gives it an edge over competitors such as Foot Locker.
Europe is the next battleground for JD Sports, the broker believes, where it will face stiff competition.
Overall, it was a positive end to 2022 and the start of 2023 for sportswear brands, although this was not entirely reflected in share price movements.
Footlocker, for example, saw shares kicked down 9% despite an “impressive” fourth quarter due to an expectation sales will decline in 2023.
Nike also delivered strong third-quarter results, according to the broker, although shares remain flat.
Swiss sportswear brand On, however, jumped 28% as its “retailer-focused strategy” continues to gain momentum.