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JD Sports should accompany international expansion with strong online offering, analysts say

Experts are wondering how the mix of physical and online shopping will evolve and the implications on the store portfolio

JD Sports Fashion PLC - JD Sports should accompany international expansion with strong online offering, analysts say

JD Sports Fashion PLC (LON:JD.) should make sure the rollout of stores in the US and Europe comes with a strong online offering in those countries, analysts said.

The ‘athleisure’ seller flagged constrained footfall in its preliminary results on Tuesday as stores come to terms with social distancing measures.

READ: JD Sports strengthens online business as it forecasts prolonged low footfall

Although the firm did not provide any figures, house broker Peel Hunt estimated a drop in footfall between 40% and 50%, while online sales more than doubled during the forced closures.

“The retailer has been wise to expand its presence internationally to reduce its reliance on Western Europe, opening stores in Europe, Asia Pacific and the US during the period,” commented Emily Salter, analyst at GlobalData.

“However, these openings will be extremely impacted by COVID-19… JD must ensure that it grows its online sales in these countries to mitigate low footfall, using its stores to promote brand awareness.”

The FTSE 100 group has grown its online presence by introducing initiatives such as buy-now-pay-later system Klarna and loyalty scheme JDX, which Salter said is especially important as key brands such as Nike and Adidas increasingly prioritise their direct to consumer channels.

It also announced on Tuesday it invested further its main warehouse, near Manchester, over expectations of a permanent shift of demand to online following the pandemic.

The next object of focus could be Go Outdoors, the camping arm that was bought back from administration last month, as 90% of its revenue historically came from physical stores.

Several of them may be closed permanently but JD Sports vowed to protect the maximum number of jobs possible by moving employees to other sides of the business.

“Alongside the fact that the company has been able to regain some of its former momentum since its stores have now reopened, there is now a question of how the mix of physical and online shopping will evolve, and the implications that could have on the company’s store portfolio,” said Richard Hunter, head of markets at interactive investor.

"JD Sports’ meteoric rise may have come to a grinding halt as a result of the pandemic, but its attractions remain in light of its plans for further expansion."

Quick facts: JD Sports Fashion PLC

Price: 684.4 GBX

LSE:JD.
Market: LSE
Market Cap: £6.66 billion
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