JD Sports Fashion PLC (LSE:JD.) has provided a “reassuring update”, analysts at Barclays believe, as it posted interim results slightly ahead of consensus and outlined it is on target to achieve full-year pre-tax profit guidance of £1.04 billion.
Given a spate of downgrades for US peers and the rise in shoplifting on both sides of the pond, some investors were growing concerned about the chances JD could be the next retailer to suffer some poor fortune.
Thursday’s interims have had the opposite effect, Barclays reckons.
Reiterating an 'overweight' rating on the stock, the bank sees potential for the share price to reach as much as 210p, representing close to a 50% upside to the FTSE 100 firm’s current value.
Profits for the group soared by 26% to £375 million in the first half, while revenues managed to lift by 8% to £4.78 billion, JD’s trading update revealed.
JD Sports stock wows despite shoplifting fears
Impressively, the jump in profits comes despite gross margins slipping by 50 basis points to 48%, driven lower by a “more normalised promotional environment due to restored product availability” – or simply put, the group had more stock and therefore launched more sales.
“There is a heightened focus on Inventory, which has been volatile in recent years given the supply chain disruptions,” Barclays added.
Source Just Style
Inventory at the end of the first half reached close to £1.63 billion, down from £1.46 billion six months prior, with inventory growth of 11% slightly behind organic sales growth of 12%.
Analysts at Barclays added: “At first glance, the growth in inventory being broadly consistent with revenue growth is encouraging.
“There is no obvious impact from shrinkage that others have mentioned.”
Shares in JD Sports are trading close to 8% higher on Thursday, having opened at just under 135p.