RE: Buy11 Dec 2023 19:32
Recommendation From Hargreaves Lansdown out just now:
JD Sports Fashion – the perfect fit?
The global sports apparel market is huge – valued at $196bn in 2022 and expected to grow to $272bn by 2030. To service all this demand, JD Sports is rolling out stores all over the world, with upwards of 200 more expected this financial year.
The group’s sales mix by region is much better balanced than its biggest competitors, which helps smooth out bumps in the road if one market slows.
With US sales being a bit lifeless this year, this diversity has been a major driver of its outperformance relative to peers.
Strong brand relationships with key partners like Nike and Adidas help it secure exclusive items, designed to lure customers in. And because the group sits at the premium end of the market, it typically has healthier margins than its peers too.
We must point out that JD Sports operates in the corner of the retail sector that we think is most exposed to an economic downturn. That means if conditions deteriorate and consumers begin to feel the pinch, it will likely feel more pain than others.
The group had a net cash position of just under £1.3bn at the half-year mark, roughly 16% of the group’s total valuation. This is a huge cash buffer and could help to cushion any potential turbulence in the near term.
The company’s valued at 10.6 times forward earnings, significantly below its long-run average. This reflects the uncertainty surrounding the retail sector in the near term. But in the long term, we think this is an attractive valuation for a company which the market views as having strong revenue and profit growth prospects
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