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Teen favourite JD Sports had a bad innings this week after majority owner, Pentland, offloaded 24 million shares, causing prices to slump by nine per cent. The shares are still up over 100 per cent for the year to date though, standing at 741.20p, leading some analysts to suggest that the current slum could be a good buying opportunity. Despite the sizeable off-load, Pentland remains the chain’s largest stakeholder holding more than half its shares and says it is ‘committed to remaining a long-term majority shareholder.’
So, is this a good time to get a foot in the door with the on-trend trainer retailer? JD have seen surging sales recently, successfully carving out a niche as the go-to shop for fashion conscious teens. Analysts have been impressed by the chain’s diversification of products and brands and have pointed out that its successful acquisition of US chain ‘Finish Line’ last year provides great global growth opportunities. One blight on the horizon for the sports chain is its attempted acquisition of footwear chain, Foot Asylum, which has been stalled by an ongoing investigation from the competition watchdog who says the merger could result in a ‘substantial lessening of competition.’
Most analysts, though, are not reading too much into Pentland’s share sell-off – Berenberg has reiterated its ‘buy’ rating and raised its target price to 860p. It points out that there are some who think JD’s popularity has run its course and have compared it to Foot Locker, which is trading at a 65% discount to JD. However, Berenberg described JD as ‘fundamentally more profitable’ saying it deserved to trade at a healthy premium to its rival.
Another one-time fashion favourite that saw a share price slump this week is clothing brand Superdry, after it revealed its half year figures. Its share price fell by four per cent, standing at 482.60p at the time of writing, as it posted an 11 per cent fall in sales to £369.1 million for the six months to October. Unlike JD, Superdry has been showing signs of falling out of fashion for some time and after a boardroom coup earlier this year, its founder Julian Dunkerton has started to execute a turnaround plan. But will it be enough to bring the brand back to popularity? Dunkerton said that despite the first half figures, Superdry had made an ‘encouraging’ start to its third quarter and described Black Friday online sales as the ‘strongest ever.’ He pointed out that the turnaround plan, which includes more fashion-led brands, less discounting and the abandonment of a proposed kids range, will take up to three years to complete.
While profits were down, gross margins had improved by 2.5 per cent – however Dunkerton said that he expected full year sales would fall by about five per cent. Analysts were cautious about the fashion brand’s prospects – Peel Hunt said ‘early signs of range improvements look encouraging’ but pointed out that interim profits are around £10m below market expectations. While there are some signs that Dunkerton’s turnaround plan might bring the brand back to life, it will take time before investors can be sure he is on the right path.
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