Shares in JD Sports Fashion PLC jumped more than 8% in early London trading today after the sportswear retailer published a first-quarter trading update that beat market expectations. The stock was the best performer on the FTSE 100, which rose 0.4% to 8,215 points, as investors welcomed signs of a recovery in consumer spending and profit margins.
The Bury-based company reported that like-for-like sales in its North American division grew 6.5% in the 13 weeks to 1 August, driven by strong demand for trainers and athleisure wear. This helped offset a more subdued performance in Europe, where like-for-like sales rose just 1.2%. Overall group revenue increased 4.8% on a constant currency basis, ahead of the 3.5% consensus forecast compiled by Bloomberg.
Gross margins improved by 110 basis points compared with the same period last year, which the company attributed to lower freight costs and a reduction in discounting. JD Sports also said its inventory levels had normalised after a period of excess stock that had weighed on the sector. 'The US market continues to be a standout for us, and we are seeing good momentum across our key brands,' the company said in a statement.
Analysts at Shore Capital described the update as 'reassuring' and said it demonstrated the resilience of JD Sports' business model. 'The margin recovery is particularly encouraging and suggests the group is managing its cost base well,' they wrote in a note. However, they cautioned that consumer confidence in the UK and Europe remained fragile, and that the second half of the year would be a more significant test.
For UK investors and pension holders with exposure to the FTSE 100, the rally in JD Sports provides a welcome boost to portfolios that have been under pressure from inflation and interest rate uncertainty. The stock remains down about 12% year-to-date, however, reflecting broader concerns about the retail sector. Rival sportswear retailer Frasers Group also rose 1.8% in sympathy.