JD Sports Fashion Plc (JD Sports) is a United Kingdom (UK) based sports fashion and multichannel retailer of branded sports and casual wear, combining global brands such as Nike, Adidas and Puma. The Group also retails and distributes outdoor clothing and equipment.

Notably, JD sports recently announced record results for the first half of its fiscal year (in the 26 weeks to 31 July 2021), with these being predominantly bolstered by its US acquisitions, and online sales in the UK.

While giving rise to a global economic crisis, the unprecedented coronavirus pandemic and ensuing repercussions, presented the Group with a number of challenges, notably through widespread strain on international logistics, supply chain challenges and materially lower levels of footfall into stores across many countries after re-opening.

Notwithstanding the aforementioned challenges, the sportswear giant continued to demonstrate outstanding resilience throughout the first half of 2021 and delivered total revenue growth an overall improvement in operating performance.

For instance, in an attempt to mitigate the impact of non-physical store movement following the pandemic related social distancing restrictions, JD Sports shifted their offering online, swiftly adjusting to the pandemic induced reality. Inevitably, this strategic decision has assisted the Group in achieving solid interim financial results.

More specifically, total Group revenue during H121 increased to approximately £3.9bn, illustrating an overall improvement of approximately 52.7 per cent or £1.3b on a comparable basis (H120: £2.5bn), with a number of recently acquired businesses also included in the first half results for the first time also attributing to this growth Additionally, consolidated Group EBITDA amounted higher to £746.4m during the first six months of the year, from £337m in H120, demonstrating a year-on-year improvement of 121 per cent.

Notably, JD Sports delivered record results, with first half profit before tax and exceptional items amounting to £439.5m, reflecting an encouraging improvement which has indeed exceeded pre-pandemic levels (2020: £61.9m; 2019: £158.6m).

Despite the fact that this improved operating performance is partly attributable to the Group’s latest acquisitions of US sports retailers Shoe Palace and DTLR, which on a stand-alone basis contributed a total of £72.9m to profits, JD Sports has successfully capitalised on the second round of fiscal stimulus authorised by the US federal government.

Interestingly, US consumer spending recovered in Q2 2021, driven mainly by the positivity brought about by the speedy vaccinations programme, stimulus payments in March 2021, an optimistic outlook toward economic recovery, and the general reopening of the economy.

No dividend payments were declared as H121, with management hinting towards a potentially larger full-year dividend subject to the performance of the Group over the full year, after a careful consideration of any potential further restrictions on trading.

In terms of forward-looking expectations, JD Sports remains confident that its strengths in retail dynamics and operations will possibly provide the Group with a robust platform to make further progress in the short to medium term. Nevertheless, the Group remains cautious vis-à-vis possible further restrictions on trading during the upcoming Christmas period.

Nevertheless, JD Sports further sustained that the Group is generally encouraged by its performance in the first few weeks of the second half of 2021, although retail footfall remains comparatively weak in many countries. Assuming a prudent but realistic set of assumptions for the peak trading period ahead, in addition to current industry-wide supply chain disruptions, JD Sports at present anticipates an overall headline profit before tax for the full year of at least £750 million.

This article was issued by Andrew Fenech, research analyst at Calamatta Cuschieri. For more information visit www.cc.com.mt. The information, view and opinions provided in this article are being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice.