Berenberg highlights recovery potential, cheap valuation at JD Sports

(Sharecast News) - Berenberg has reiterated a 'buy' recommendation for JD Sports despite an underwhelming set of interim results this week, citing the stock's low valuation and the company's potential for a recovery. First-half pre-tax profit of £351m was close to the retailer's implied guidance of £354m, representing 40% of the full-year consensus forecast, which stood at £885m prior to the results.

That has since come down to £878m - implied by the guidance range of £853m-914m - though Berenberg has trimmed its own estimate from £782m to £865m due to updated FX translation rates.

"We continue to expect lfl sales to be down by 2.5% in H2, the same rate as seen in H1, while the gross margin could continue to dip as a result of the business mix and a promotional UK online sports fashion market," the broker said.

Nevertheless, Berenberg said it remains "constructive on the company's recovery potential", with the 2026 FIFA World Cup next summer expected to bring a "halo effect" to the sportswear market. Meanwhile, the broker highlighted the company's recent work to catch up on technology and logistics infrastructure, as it ramps up its new Heerlen distribution centre in the Netherlands.

"At c7x forward P/E (January 2027E), the stock continues to look cheap, in our view, even if we await a lfl sales recovery as the likely catalyst required for a re-rating," the broker said.

Berenberg left its 155p target price for the stock unchanged, implying significant upside to Thursday afternoon's price of 89.32p (up 1.6% on the day).