JD Sports Surpasses H1 Profit Expectations and Confirms FY25 Guidance

JD Sports Fashion plc recently reported results that exceeded expectations, fueled by a robust performance in both European and North American markets. Analysts from RBC Capital Markets noted that JD’s diverse brand offerings have effectively compensated for weaknesses experienced by Nike, leading to better-than-anticipated profit margins in the U.S. and Europe. This performance should bolster investor confidence in JD’s profit before tax (PBT) guidance for fiscal year 2025.

In the first half of the year, JD Sports achieved sales of £5 billion, slightly surpassing projections, with an organic year-on-year growth rate of 6.4%. The company posted a PBT of £406 million, outperforming the consensus estimate of £385 million, while earnings per share (EPS) reached 5.15p, marginally exceeding the forecast of 5.10p. JD experienced growth particularly in North America and Europe, where profits surpassed expectations, while performance in the UK and Asia-Pacific regions aligned with forecasts.

JD Sports has maintained its full-year 2025 PBT guidance of £955-1035 million, aligning with the consensus estimate of £977 million. However, the company indicated that foreign exchange fluctuations would negatively impact H2 PBT by £20 million, following a £6 million hit in the first half. The acquisition of Hibbett is projected to contribute an additional £25 million to PBT in H2.

Inventory levels have risen by 24% year-on-year due to the recent acquisition as well as a seasonal increase of £137 million. Although inventory is somewhat elevated, it is consistent with the company’s growth strategy. Net cash, excluding leases, was reported at £41 million at the end of H1, which was slightly below expectations.

JD Sports continues to be a vital retail partner for significant brands like Nike and Adidas, capitalizing on its appeal to urban and price-sensitive consumers. The company has potential for expanding its customer base in the U.S. and enhancing its online presence, particularly in Europe, according to RBC.

Governance improvements are anticipated, yet the rapid pace of growth poses higher execution risks. Currently trading at approximately 12 times its estimated price-to-earnings ratio for 2024, JD Sports is operating near the lower end of its historical range.