City round-up: JD Sports; AO World

JD Sports Fashion, the Bury-based sports and athleisurewear retailer, is performing to expectations and anticipating a good summer, on the back of the upcoming UEFA European Championships tournament.

In a trading update for the year to February 3, 2024, today, the group revealed that its 2024 profit before tax and adjusted items is expected to be in line with the £915-935m guided range.

On a constant currency basis it said Q4 like-for-like (LFL)sales were up 0.1% and organic sales were up 4.4%. Full year LFL sales were up 4.2% and organic sales growth was 8.4%. Total sales grew 3.6% to £10.5bn while gross margins were 47.3%

During the year the group opened 215 new JD stores.

It said it expects to achieve full year pre-tax profits of between £900-£980m for the current 2025 financial year, with trading in the new financial year-to-date in line with expectations after seven weeks.

Chief executive, Régis Schultz, said: “In our FY24 financial year, we outperformed the sportswear market, reflecting the strength of our business.

“We achieved like-for-like sales growth of over four per cent, organic growth of over eight per cent and our athleisure fascias achieved organic growth of over 10%.

“We made good strategic progress, opening 215 new JD stores, and focusing our effort on developing JD and enhancing EPS through taking full control of ISRG and MIG. We expect profit before tax for the year to be in line with the guided range given in January.”

He added: “Looking ahead, the current trading environment remains challenging due to less product innovation and elevated promotional activity, especially online.

“We anticipate trading conditions will improve as we move through the year, helped by a busy sporting summer and softer comparatives with last year.

“We continue to invest in our people and the infrastructure needed to deliver our long term growth plan. I am excited about the opportunities for the JD Group going forward and our ability to deliver attractive returns to shareholders.”

Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “Amid cracks in the athleisure and footwear sector, JD Sports has managed to outperform the market and is upbeat about prospects for the year ahead.

“That’s quite a different message from other key players in the sector such as Lululemon and Nike which both disappointed with their latest updates as consumers rein in spending and competition heats up.

“JD Sports isn’t completely immune. The marketplace is awash with discounting and a lack of new products to excite shoppers. Interest rates remain high and consumer spending habits are unlikely to show a drastic improvement until we’ve seen several rate cuts by central banks. However, JD continues to open new stores which might help it grow sales at a faster rate than the average peer.”

He added: “JD’s success has been driven by consumers racing to buy the latest trainers, pairs of which often costing hundreds of pounds. It has also been able to extract more money from the same type of customer by convincing them to snap up expensive tracksuits and running tops.

“The company’s scale and deep relationships with important brands has given it an advantage over many rivals and enabled it to expand across different geographies and become a major force in the sports retail world.

“The current blip in the trading environment is certainly testing its abilities to hunker down and keep the tills ringing, yet when the backdrop improves JD has the right ingredients to continue its goal of increasing market share.”

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John Roberts, founder of AO World

AO World, the Bolton-based electricals retailer, has given a pre-close update for the 12 months to March 31, 2024, in which it said it has entered the new financial year with “good momentum”.

It said estimated revenues for the full year are expected to be approximately £1.04bn.

Its core business continues to trade positively through Q4, and AO.com has returned to revenue growth during the quarter, as expected.

The group now expects adjusted profit before tax for FY24 to be at least at the top of the previously guided range of £28-£33m.

At the period end AO said it expects to have net funds on a pre IFRS16 basis of more than £30m.

The company’s £80m revolving credit facility has been extended with existing lenders to April 2027 on the same terms.

John Roberts, CEO and founder, said: “I’m pleased with the clear progress that we’re making after pivoting our focus to profit and cash generation during the 2023 financial year.

“As we expected at our half year results, we returned to revenue growth in our core business during Q4 and, as a result, we’re entering the new financial year with good momentum.

“With net funds on our balance sheet and a clear plan, we remain confident in our ability to deliver on our ambition for 10-20% revenue growth in the year ahead and medium term profit guidance of five per cent adjusted PBT (profits before tax) margin.”

AO expects to publish its full year results to March 31, 2024 on June 26.

Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “Online white goods seller AO World’s life as a public company has had more ups and downs than a rollercoaster and investors will hope today’s ascent for the share price does not presage a rapid descent to come.

“Like many online-based retail businesses, AO was well placed during lockdown but subsequently its fortunes took a turn for the worse. Having returned to a more sustainable path towards profit and cash flow in its financial year to the end of March 2023, the company has now confirmed revenue guidance for the current year and flagged profit at the top end of what was previously guided.

“For the year about to start, the group still hopes to see strong revenue growth and is sticking with its medium term margin target.”

He added: “The basics of retail are fairly simple – have the right amount and the right kind of stock, sell it a price customers will stomach but which still allows you to make a decent profit, and make sure the customer experience is such that they will buy from you again. AO World seems to be getting more of this right and that’s coming through in its financial performance.”