Peel Hunt reiterates 'buy' rating on JD Sports

Peel Hunt said JD Sports had made "a positive start" in the US, with its Finish Line operation growing its like-for-like sales and margins as JD best practices were introduced.

The broker noted there was an "interesting discussion" around the returns profile of roughly $1.0m attached to each of the seven stores refitted to JD Sports branding.

"These 'badge flips' are less capital intensive (sub $100k each): here JD is introducing its own clothing 'cages', but using the FL footwear fittings," highlighted the analysts.

Peel Hunt said JD's stronger merchandising could see a "more favourable" cash return on invested capital emerge and with the "lite" nature of the expended capital, the company could also see a quicker roll-out.

"We've been to Atlanta to see two badge flips: the stores feel unmistakably 'JD' and we suspect that this will be the way forward in the US, as well as some brand-building flagship stores in big cities," said Peel Hunt.

"Elsewhere we suspect that trading remains strong and we retain our enthusiastic 'buy' rating."

Peel Hunt stood by its 800.0p target price for the stock but said JD's current valuation implied "further strength in the UK and Europe" and noted it didn't expect the shares to "wait" at that price for long.