RBC stays positive about JD Sports on improving global footprint

14th Oct 2024 09:15

(Sharecast News) - JD Sports Fashion's share price has fallen sharply in the wake of the retailer's interim results two weeks ago, but RBC Capital Markets has reiterated its 'outperform' rating, saying that the stock's valuation still remains "undemanding".

The broker said that the recent fall in the shares - down 15% since the end of September - is more to do with concerns over the outlook for sports giant Nike and JD Sport's wholly owned subsidiary Hibbett in the US, rather than the company's long-term fundamentals.

In a research note on Monday, RBC highlighted the potential upside for JD Sports from its recent acquisition of France-based footwear and apparel group Courir, which is expected to close by the end of the year.

"We think the main strategic advantage for JD in acquiring Courir will be to leverage its more female-focused offer. We think the acquisition of Courir could offset what so far has been a softer than expected performance by Hibbett, which generates c.70% of its sales from Nike in the south-east of the US," RBC said.

Once Courir is integrated, JD Sports' proforma sales should comprise of 37% in the US, 34% in Europe, 25% in the UK and Republic of Ireland and 4% from the rest of the world.

And with the stock trading at just 10 times 2025 estimated earnings, its valuation "remains undemanding for a company with such a strong global footprint", the broker said.

Despite the positive comments, shares were down a further 2.4% at 127.95p by 1027 BST, compared with RBC's price target of 160p.