JD Sports hurdles 2016 forecasts a year early

The pace of growth at JD Sports has seen the sportswear retailer sprint past its 2016 forecasts a year early and hurdle £100m of operating profits for the first time after it disposed of its lossmaking young-fashion division in November.

On revenue up 25% to £1.52m, operating profit jumped 23% to £102.2m and profit before tax and exceptionals leapt 22% higher to £100m, a 5% beat of consensus forecasts. The £9.5m of exceptional charges related mostly to goodwill impairments and a warehouse reorganisation.

The group enjoyed what executive chairman Peter Cowgill called an "outstanding performance" from sports fashion, with like-for-like store sales growth across the combined European store estate of 13% as international expansion also saw stores added in all existing territories.

The outdoor segment suffered a comparatively difficult second half due to the very mild autumn and winter and still faces very strong competitor promotional activity.

Outdoor cut operating losses before exceptional items by £3.1m to £4.9m.

Cowgill, who has been in the role since 2004, said the strong fashion performance was due to JD's "unique and often exclusive sports and fashion premium brand offer" that continued to "enthuse and excite" customers and suppliers.

"This, combined with our market leading standards of visual merchandising and disciplines instore, provides the basis for international success," he declared.

Plans in sport-fashion for the new financial year include a new high-profile store in London's Oxford Street and acceleration of openings in Europe, though that may constrain profit growth in the short term from those divisions.

A £6.3m pre-tax exceptional loss from on the disposal of Bank but repayments of £18.2m against JD's inter-company loan have been made which represents a substantial recovery of the inter-group indebtedness at disposal.

Net cash balances improved by £38.9m in the year to £84.2m, thanks in part to £16.5m of lease incentives received in the last two months connected with the acquisition of five former Kiddicare stores.

Analysts at broker N+1 Singer said that given the considerable future potential in both the UK and especially in Europe it believe the stock should continue to outperform.

Given sports-fashion growth, international expansion plans, logistics enhancements and inroads into outdoor's losses, the broker expects consensus 2016 forecasts to be upgraded by around 10%.

"Despite higher capex guidance the net cash beat should partly ripple through too."