JD a 'must have' amid revolutionary times in sportswear - Peel Hunt

JD Sports shares are a "must-have for the short and long term", said broker Peel Hunt after the sportswear retailer's full year numbers beat forecasts thanks to a very strong like-for-like store and online performance.

Tuesday's results showed profit before tax and exceptional items was up 26% to a record £307.4m on revenue of £3.2bn, up 33% as JD added 56 stores across Europe, a further nine stores in the Asia Pacific region, including the first stores in Australia and Korea. The company also lifted its dividend to 1.63p a share from 1.55p.

"At a tough time for the industry and the consumer, that’s a stand-out effort and it is clear that the JD offer is exactly what the customers want, be that physically or online," said Peel Hunt analyst Jonathan Prichard.

Prichard points out that in the current "revolutionary times" in sportswear, big brands such as Nike and Adidas are cutting the number of retailers to which they supply the hot new trainers and other lines.

He said support from top-tier supplier is "increasingly important" for retailers and JD is showing the sort of "form" that seems invaluable in this point in the market, with the move to the US via the recently agreed $558m acquisition of Finish Line is "another logical step towards JD becoming a global brand and thus a key partner of the big suppliers".

"These are revolutionary times in the industry and its hard to find a sports retailer playing its cards as well as JD," said Prichard.

He said points out that in the changing world of sportswear, support from top-tier supplier is "increasingly important" amid a reducing list of retailers that are able to have access to the best product from the likes of Nike and Adidas, as the US sportswear giant pursue their own direct-to-consumer channels.

"Thus impressing these brands with store formats and increasing volume is massively important and there are not many retailers doing that at present. Today’s numbers show that customers enjoy the JD experience and with forecast momentum positive and likely to stay as such, the early teens multiple for the shares is far too low in our view."