JD Sports first-half profit edges past forecasts as Deutsche Bank keeps 'hold' rating

JD Sports Fashion PLC (LSE:JD., OTC:JDSPY) delivered a modest first-half profit beat as stronger-than-expected gross margins offset weaker profitability in North America, according to Deutsche Bank, which reiterated its 'hold' rating and 95p price target. Adjusted profit before tax came in at £282 million, slightly ahead of the £279 million consensus forecast, although it was down 19.7% year on year. Revenue, previously reported, slipped 0.7% to £5.90 billion. Gross margin declined by 20 basis points to 46.8%, a better outcome than the 50-basis-point fall expected by analysts, as targeted online price investment was partly offset by higher marketing contributions. Adjusted operating profit was £294 million, down 20.5%, with the margin falling to 5% from 6.2%. Regional performance was mixed. North American operating profit dropped 32% to £123 million and margin contracted by 230 basis points to 5.5%, while UK operating profit fell 15.3% to £94 million. Europe proved more resilient, with operating profit down 1.9% to £52 million. JD's core segment saw operating profit fall 18.9%, while Sporting Goods & Outdoor delivered a 32% increase. The retailer maintained its full-year guidance for adjusted profit before tax of £700 million to £800 million and free cash flow of £460 million to £520 million. Deutsche Bank said the results were broadly in line and expected only limited changes to consensus estimates.