Record full year results (11 Apr) from JD Sports Fashion (JD.) confirmed a third consecutive year of double digit store like-for-like growth from the core Sports Fashion business. Can it keep going?

Toughening comparatives suggest this breathless same-store growth rate will be hard to sustain. There are also concerns about high levels of personal debt among UK consumers which could eventually curb retail spending.

We still rate the stock as a ‘buy’ because the branded sportswear retailer’s global growth potential is immense.

In particular, we believe the market’s focus will increasingly be on its international business which is in excellent health.

JD Sports now generates approximately 30% of its business from outside of the UK, up from 23% a year ago and a mere 5% seven years ago.

‘Whilst the core UK Sports Fashion business remains the engine room of the business we are encouraged to see significant growth in other parts of the group,’ says Cantor Fitzgerald analyst Mark Photiades.

‘JD is now fully recognised by the leading sportswear brands as a major global partner and player and the opportunity for further international growth in Europe and beyond is significant.’

Clearly differentiated from rival Sports Direct International (SPD), executive chairman Peter Cowgill has successfully turned JD Sports into an important retailer for major international brands, principally Nike and Adidas.

Cantor forecasts 21.5p earnings per share for the year to January 2018. Based on the latest share price of 447.9p, JD trades on a price to earnings (PE) multiple of 20.8 times. We believe it deserves such a premium rating, given rapid growth and ongoing expansion potential.

‘The valuation, in our view, still does not reflect the true value of the JD concept, which is trading in a booming segment of the retail market,’ says Photiades.

‘The JD format has a great track record growing operating profits by 44% per year over the last three years. It is clearly differentiated from its closest UK competitor, has the support of the leading sports brands in sports fashion and has significant potential to be developed overseas, where it now has clear momentum.’

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