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Earnings

JD Sports’ share price: What to expect in half-year results

Unsurprisingly, JD Sports’ [JD.L] share price has taken a hit this year. Before the coronavirus, the retailer was one of the few shops thriving on the UK high street. A combination of exclusive trainers and the boom in athleisure drew customers in and saw JD Sports’ share price experience phenomenal growth.

That all changed in March when stores closed and investors dumped the stock.

As restrictions continue to ease and shoppers return to the nation’s high streets, JD Sports’ share price has soared over 143.86% since its low on 18 March (through 4 September’s close). With JD Sports’ share price still down 14% on the year, it could be time for investors to jump on a bargain. 

 

 

When is JD Sports reporting?

8 September

 

What could move JD Sports’ share price post-earnings?

Strong online performance

In its last full-year results, JD Sports saw revenue of £6.11bn, a substantial increase on 2018's £4.71bn haul. Profit before tax also increased, up 3% to come in at £348.5m. During that time, JD Sports opened 52 new stores and had a stated strategy of opening a store a week across Europe. 

However, things will undoubtedly be different in the half-year results that cover the pandemic’s peak. During this time, JD Sports was forced to close 98% of its physical stores, with the retailer saying that it will need to reevaluate its store opening policy in the future.

£6.11billion

JD Sports 2019 full year revenue - up from £4.71bn in 2018

  

Offsetting this, however, could be online sales which JD Sports notes have been ‘strong’ during the pandemic. Half-year results will reveal just how strong, but JD Sports’ share price is more dependent on its online business than ever before. 

Last year, online sales in the UK and Republic of Ireland accounted for 22% of revenue, up from 18% the previous year. With other retailers reporting an increased shift towards online, it will be interesting to see how this channel performed for JD Sports. Given that a lot of people swapped work wear for athleisure in lockdown, sales could be robust.

 

Strong earning potential

Michael Green, writing on Stockopedia, highlights how much JD Sports’ share price depends upon the retailer’s quality as a company. Green points to JD Sports’ 27.8% 5-year Return on Capital Employed, indicating the retailer is good at investing its cash. Simply Wall Street also highlights JD Sports’ earning potential, saying that over the next few years the retailer’s earnings are expected to grow 79%. 

A look at the balance sheet shows that JD Sports’ earnings per share came in at 34.26p in financial year 2020, up from 28.44p seen in 2019. However, with income likely to come under strain in half-year results, this year’s earnings will probably be lower.

 

Market Cap£7.083bn
PE ratio (TTM)28.77
EPS (TTM)25.30
Quarterly Revenue Growth (YoY)18%

JD Sports share price vitals, Yahoo Finance, 7 September 2020

 

So, is JD Sports a buy?

While JD Sports’ share price might be down on the year, it's having a remarkable run of form right now. In the 31 days to 4 September, JD Sports’ share price soared 7.5% and, with an RSI of 72, it seems that there could be more upwards momentum left in the stock. Whether this continues depends on just how well it performs in half-year earnings.

JD Sports’ share price has an average 12-month price target of 760p from analysts tracking the stock on the Financial Times. Hitting this would see a 6.6% upside on the current share price (as of 4 September’s close). Of the 12 analysts offering recommendations, JD Sports has 4 Buy and 5 Outperform ratings.

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

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