JD Sports profits jump but still cautious about stretched shoppers

JD Sports enjoyed a short-lived boost to its shares this morning after its latest results showed profits continuing to improve but it seems the market's enthusiasm has already petered out and profit-taking has now set in.

The retailer managed to rise some 9% early on after posting a 26% increase in pre-tax profits before exceptional items to £67.4m in the year to January 30. It also said that recent trading had "been encouraging" with UK and Ireland retail like-for-like sales up 2%.

It is passing some of the good news onto shareholders in the form of 65% dividend rise to 14.7p, totalling 18p for the year.

But the company sounded a note of caution amidst all the pre-election talk of Britain's fiscal woes:

"We recognise the increasing challenges of strong comparatives and the current economic and fiscal threats to consumers' expenditure."

By 9.30am the gains have given way to a 3.5p dip in JD' shares tp 730p, having touched 800p earlier today.

Charlie Menegatos, senior trader at derivative broker Accendo Markets comments in a morning note that the pre-tax profits "soundly beats" consensus forecasts of £61.6m.

"When Accendo Markets picked out JD Sports Fashion as a momentum buy last year, our expectations were based on the near-meteoric recovery from year lows of 175p to 593p on September 22. The pace of recovery has continued, almost against our expectations, but driven by strong Christmas trading and exclusively branded and own label products, and speculation over the stake in the group acquired by Sports Direct International (SPD). With our original target price of 630p soundly beaten, at 712p the group still trades on a modest valuation, with plenty of upside drivers on offer. Accendo Markets rate JD shares an ongoing momentum buy, with an initial 4 week target of 782p and beyond as the year progresses."

From tracksuits to trench coats - elsewhere in retail, Burberry has made a rare appearance at the top of the FTSE 100 risers board this morning, squeezing out the miners after a vote of confidence in the shares from Deutsche Bank. Analysts at the investment bank have raised their price target on Burberry to 750p from 650p. The shares are currently up 15.5p to 712.5p.

Finally, Mothercare has been lifted to a "buy" recommendation by Collins Stewart and the shares are up 8p to 601.5p.

Analyst Georgina Johanan comments that the fourth quarter was disappointing and so 2010 and 2011 forecasts have been cut by 7% and 2%, respectively.

But, referring to the 678p price target, she adds:

"Since March the shares have declined 8% and with our PT now giving 15% upside we move to a Buy.

"Mothercare deserves to trade at a premium due to the international growth opportunity in the franchise model. There is also the potential for significant further upside as traction is gained in India and China and the potential for upgrades if UK like-for-like sales are better than anticipated and new wholesale deals are realised."