While most eyes in the retail sector are on Sainsbury, JD Sports Fashion has also put in an impressive performance.
The company's shares have jumped 60p to 610p after it said it would beat market expectations for its full year profits following a good Christmas. Like for like sales for the five week festive trading period rose 6.6%, prompting the company to comment that 2009 profits would "significantly exceed" forecasts. But it added that the extent of the rise would depend on the current weather conditions. In a buy note Investec said:
On the back of a significant improvement in trading relative to expectations in both divisions [sport and fashion], we are raising our pretax profit forecast by 12.5% for 2010, from £56m to £63m. Given the strong cash generation and extremely prudent levels of dividend cover we are also forecasting a higher increase in the final dividend, to give a total of 15p (previously 13p). This supports an increase to our price target from 710p to 750p and we remain buyers.
Meanwhile Singer Capital Markets' Mark Photiades said:
This strong performance, across both fascias, is an excellent achievement. In particular, the growth seen in fashion is very encouraging, as we believe that going forward the fashion division will be one of the main growth drivers for the group, primarily via the acquired Bank chain. There is considerable scope for profits to improve if they continue to enhance the product and brand mix, and then scale the business up. The strong trading at the core sports division is also encouraging, and demonstrates its resilience contrary to some observers' expectations
From next year, we expect its international development plans to pick up pace, primarily via its French acquisition. The Canterbury rugby brand also looks well positioned for growth and the recent acquisition of stakes in the Australian and New Zealand distribution companies should create further leverage.
Even prior to today's upgrades the shares were on a significant discount to the wider sector. The shares are therefore likely to bounce further on the back of today's news and we re-iterate our buy stance.
