Key Numbers
Revenue up 25% to £1.5bn and PBT up 22% to £100m. L4L up 13% across the European fascias, Outdoor still weighing on results. Added 37 stores and 142k sq ft in Sports Fashion, mainly in the JD and Size fascias.
Analysis
Clearly, this is an absolutely unbelievable set of results. Some investors will probably be a bit puzzled here but JD Sports is benefiting from a trend that has swept through the sports apparel industry in the U.S. and is now coming to our shores. At the current valuation, we are getting an extremely good price for the risk that this trend does/doesn't continue.
JD Sports looks like a fairly mature company so how on earth is it achieving double digit L4Ls?
There are two trends here: people are wearing "sporty" clothes more ("athleisure", look at Lululemon or even Supergroup's (!!!) latest range) and manufacturers, Nike in particular, are hiking prices year after year.
Footwear has been one category experiencing particularly large price increases and was an area of particular strength, it seems, for JD Sports this year. For evidence check out Foot Locker which has seen double digit growth in sports footwear categories for a few years now*. Of course, you can also see the same in Nike's financials. Analysts have fretted that consumers would balk at these increases but they haven't and I am guessing that they won't any time soon.
Digging further into this trend, the catalyst is changing consumer attitudes towards health and fitness. The rise of Lululemon in particular seems to have been a real turning point. Lululemon started out as a niche provider of yoga clothing but it quickly became clear that women were wearing the company's products all the time. Some people call this the "ath-leisure" trend, Foot Locker has called it the "casualization" trend...regardless, it has profoundly changed the demand for this type of product.
Okay, why isn't this just a one-time thing though? Consumer trends come and go, why will this stay? I believe this will stay because we have seen consumer attitudes in other industries change in a similar direction too. For example, food producers/restaurant chains in the U.S. have been badly shaken. Kellogg is really struggling, McDonalds are struggling, and the list goes on. I wouldn't want to short any of these stocks, some restaurant chains like Wendy's or Burger King have done well despite this trend, but the point is that consumer attitudes appear…
