This morning’s update from JD Sports does not read like there is a global pandemic going on.
It grew like-for-like sales materially in the period encompassing Christmas. To guide for profit ahead of expectations despite the massive disruption resulting from Covid is a mammoth achievement.
It also demonstrates the fact that retail spending itself has held up reasonably well despite the crisis – it’s just that sales have shifted from physical stores to the internet.
“In this context JD Sports’ online channel has delivered and then some, both in the UK and across the Atlantic. The company has also mastered the basics of retail, it is good at managing stock and costs, and crucially it keeps the cash flowing in,” according to AJ Bell.
“JD Sports has a very clear idea about who its customer is and what they want – namely trainers and so-called ‘athleisure’ gear which can be worn for working out and socialising (in more normal times) as well as hanging out at home.
“A short-term concern will be that its youthful customer base will be particular exposed to the mounting jobs crisis in the UK, given they are probably more likely to work in hospitality or other retail businesses.
“Longer term, while JD is still seen in a positive light by major sporting brands like Nike and Adidas, the former, in particular, is shifting to a more direct-to-consumer model, selling more product through its own website. For now though, JD is still a valued retail partner.
“Given this encouraging update, investors will be even more relieved management did not take on the distraction of buying failing department store Debenhams before Christmas. The recent bolt-on acquisition of Shoe Palace in the US looks a much better fit.”