JD Sports rallies over 10% after fresh update

A tactical shift by JD Sports Fashion (LSE:JD.) helped to stem the slide for its share price today as the King of Trainers updated investors on its strategic priorities as well as recent trading.

Entering a lower phase of capital investment and with no material M&A on the horizon, the cash-generative business said it would look to enhance shareholder returns.

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Alongside the payment of a progressive dividend, the FTSE 100 company is to launch an initial £100 million share buyback plan.

The programme gets under way with shares the cheapest since 2017, even though the company is vastly different following acquisitions that recently included Hibbett in the United States.

Founded in the Lancashire town of Bury in 1981, JD now has 4,850 stores and generates well over a third of its revenues and 47% of operating profit from North America through brands such as Finish Line and Shoe Palace.

Total revenue is split 56% footwear, 32% apparel and 6% accessories.

The shares have slumped 44% in the past year, most recently on the back of US economic and tariff turbulence. Pressure has also come from an inventory overhang at key partner Nike Inc Class B (NYSE:NKE), which is likely to persist deep into JD’s current financial year.

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There was relief for investors today when JD reiterated £915-£935 million profit guidance for the year to 1 February and said the new trading period had started in line with expectations.

The company is braced for market conditions to remain volatile throughout the year, adding that it is too early to estimate the impact of US tariffs announced last week.

It said: “At this stage, the outcome of these developments is uncertain. We are in regular dialogue with our brand partners but it is too early to comment on the potential sector impact.”

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Relief over unchanged guidance was also a factor as the share price moved 5.8p higher to 68.9p at the top of a shortened risers board in the FTSE 100 index. The increase unwound the losses seen since the launch of Donald Trump “Liberation Day” tariffs.

Prior to today’s update, broker Peel Hunt had a price target of 200p.

It said at the end of last month,: “In our view, JD will come out of these difficult industry times in a stronger position. It remains the big brands’ partner of choice and continues to innovate both in-store and online.”

While big industry issues such as the Nike stock overhang weigh on the short-term forecast momentum, Peel Hunt said “the long-term outlook is rosy”.

JD’s chief executive Régis Schultz used today’s strategy presentation to highlight the retailer’s strong brand partner relationships and the benefits of its agile multi-brand model.

He added: “We are highly cash generative and disciplined in terms of our capital allocation opportunities.”

His medium-term plans focus on growth, profitability and improved returns, while capital expenditure is expected to move from 5% to 3-3.5% of revenue as the company nears the end of significant investment in its supply chain and infrastructure.

In North America, the strategy will lean on the multi-fascia offer in order to grow ahead of the market and improve returns on space. The UK focus is on stabilising and improving productivity.

The company paid a total dividend of 0.9p a share in relation to the 2023-24 financial year, an increase of 12.5%. The dividend yield is 1.5%.