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Shore Capital puts JD Sports under review after profit warning
(Sharecast News) - Shore Capital has placed its 'buy' rating on JD Sports Fashion under review after the high street retailer warned on sales and gross margins on Thursday. As a result of milder autumn weather and heavier discounting over the peak holiday shopping season, full-year gross margins are expected to be slightly lower than last year, leading the company to lower its adjusted pre-tax profit guidance for the 12 months to 3 February to £915-935m, from £1.04bn at the half-year stage.
Constant currency organic revenue growth was just 6% in the 22 weeks to 30 December, down from 12% in the first half. For the full year, organic revenue growth is expected to come in at 8%.
"At the midpoint, this marks a notable 15% cut to our FY24 forecast on a stock where the market was not showing strong confidence in consensus expectations (11% cut to consensus)," Shore Capital said in a research note.
"The group speak to 'good progress' against its five-year strategic plan, but the market has taken its toll on the share price with this news," the broker said, with the stock down 23% in afternoon trade at 119.35p.
"We see a lot to like in JD, not least its balance sheet, but confidence in earnings estimates is a pre-condition of a positive equity case," the broker said.
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