Shore Capital stays positive on JD Sports despite weak guidance
Shares in JD Sports Fashion tumbled on Thursday after the sportswear retailer disappointed with its profit guidance, but it wasn't enough to change Shore Capital's 'buy' rating on the stock with the broker citing an undemanding valuation.
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JD Sports warned full-year profits would be at the lower end of forecasts after a “volatile” trading environment in October due to discounting, milder weather and consumer caution ahead of the US election.
"JD’s equity has been weak going into this update and we are, frankly, relieved that the FY25 profit before tax remains within range," the broker said.
Shore Capital highlighted that JD has shown a "disciplined margin performance" despite the weaker-than-expected trading, with gross margins 0.3% better year-on-year at 48.1%.
"JD has remained disciplined in its approach to the market, resisting the urge to follow others into more promotional (and margin eroding) behaviour," the broker said.
The stock trades at a price-to-earnings ratio of around 7x and an enterprise value-to-EBITDA rating of under 5, which "suggests value to us", according to Shore Capital.
The stock was down 16.2% at 94.66p before the close.