Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said: “JD Sports hasn’t kicked off the year in style, but there were early signs of improving trends in its largest region, North America.
“On the face of it, total sales growth of 11.7 per cent in a tough retail market looks impressive.
“But stripping out the impact of its Hibbett and Courir acquisitions, organic sales growth came in at a more slender 2.1 per cent.
“The Middle East conflict hasn’t had a direct impact on JD Sports so far, given its lack of presence in the region, but there’s potential for it to weigh on consumers’ confidence and spending power going forward if energy prices remain elevated.
“Looking to the year ahead, organic sales growth has been flat so far in the first quarter, and the sports fashion market is expected to remain muted in the near term.
“As a result, JD Sports is shifting into a new phase, away from rapid expansion to squeezing the most out of its existing store footprint.
“We think this is the right approach given the weak spending outlook for its core customer base, and it should help strengthen the balance sheet.
“The group remains a highly cash-generative business, with free cash flows expected to improve further this year.
“As a result, shareholders are being rewarded with a 20 per cent increase in dividends and a new £200million share buyback programme.
“With JD’s valuation coming under pressure in recent times, the latter is equivalent to more than six per cent of JD’s current market value.”
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