Credit Suisse ups target price on JD Sports
By Iain Gilbert
Date: Thursday 18 Apr 2019
(Sharecast News) - Analysts at Credit Suisse upped their target price on retailer JD Sports from 500p to 680p on Thursday, noting that profit contributions from the recently acquired US sneaker chain Finish Line looked set to triple over the next half a decade.
Credit Suisse said the $120bn, highly fragmented US sports distribution market, which sees the top four companies accounting for only 17% of the total market, still had ample room for expansion for a "handful of high-quality distributors" as premium brands aggressively reduce the number of wholesale accounts they do business with.
Under JD's management, CS believes Finish Line is well placed to take advantage of this.
The Swiss broker also believes Finish Line's EBIT contribution will triple over the next five years, contributing to roughly 20% of the group's overall profits by 2023.
"We increase our FINL assumptions on the back of a US market/conversion analysis and on better than expected FY19 results. We forecast 365bps EBIT margin improvement by FY23.", said CS.
The analysts also said JD's 2019 results reassured them on the international expansion opportunity, and it now expects roughly 2.5% like-for-like and around 3.5% space growth every year and a more than 200bps improvement to its operating margins over the next four years.
CS did note that JD Sports, which it also reiterated its 'outperform' rating on, still faced risks such as a slowdown in sporting goods demand, execution issues in the US and disruptions caused by a hard Brexit.
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