JD Sports profits surge: What the analysts say

Outdoor operating losses were impacted by the mild weather in the lead-up to Christmas. The Bank Fashion disposal in November has rightly been a catalyst for a re-rating of the stock, which has since risen by almost 15%. The company has since closed down its test menswear chain, Open, and we expect further restructuring to enable the company to focus on developing the JD brand overseas.

The valuation still does not reflect the true value of the JD concept. The JD format has a great track record, growing operating profits by an estimated 12% p.a. over the last three years, is clearly differentiated from competitor Sports Direct, has the support of the leading sports brands Adidas and Nike in sports fashion and has significant potential to be developed overseas, where it now has momentum.

Freddie George, analyst at Cantor Fitzerald

JD has delivered an extremely good set of prelims. Trading continues to be positive and targets have been outlined to restore Outdoor to profit over the coming two years. Given the improved focus on Sports/Outdoor activities following the Bank disposal, and given considerable future potential in both the UK and especially in Europe, we believe the stock should continue to outperform.

Matthew McEachran, analyst at N+1 Singer

Outdoor was more challenging than an outstanding performance in Sports. After an encouraging first half, outdoor was impacted by the exceptionally warm weather. The turnaround has taken longer than management’s initial expectations and is now expected to deliver profits in FY17. The Ultimate Outdoor store trial will be extended in FY16 to six stores following conversion of the Kiddicare stores. JD Williams’ valuation does not reflect the significant growth opportunities in the UK and Europe.

Kate Calvert, analyst at Investec