© Bloomberg

Last week, JD Sports Fashion executive chairman Peter Cowgill sold £13.3m of the retail group’s shares. News of the share sale, on June 5, sent JD shares down by as much as 8 per cent. Mr Cowgill retains a stake of 0.67 per cent in JD Sports.

JD Sports declined to comment on the chairman’s share disposal. It’s worth noting, however, that Mr Cowgill volunteered to take a 75 per cent salary cut during the current disruptive period.

JD Sports board members have also agreed to the deferral of incentive payments, although it is expected that these will be paid at some point in the future. The group has delayed the release of its full-year results from April 15 to July 7, in order to ensure that its 2021 financial results adequately reflect the impact of Covid-19.

The announcement was followed this week by analysts at RBC Capital downgrading JD Sports from a “sector perform” rating to “underperform”. While acknowledging JD’s “strong record and management team”, RBC fears that changes to shopping habits and an online shift may hinder its longer term margin recovery.

RBC analysts expect lower sales densities in high traffic spots, which typically depend more upon public transport. Weaker earning power among younger consumers could also play its part, they wrote.

The JD Sports chairman’s decision to sell down during a tumultuous time for all retail companies should probably be viewed against his reduction in pay. The group was dealt another blow last month with the revelation that the Competition and Markets Authority had blocked its 2019 acquisition of Footasylum, an outcome that JD rejected. While JD’s post-crisis position is strengthened by exclusive partnerships with Nike and Adidas, our 2019 buy tip is now 79 per cent to the good. The shares may not reflect the risks

A third-quarter update from Softcat revealed that it had achieved growth in revenue, gross profit and operating profit, with cash receipts broadly in line with normal trends. But management flagged a high degree of uncertainty in the months ahead and that the group is by no means immune to the challenges in the wider economy. 

Still, Softcat’s ability to deliver earnings growth in an especially difficult trading environment in the third quarter is encouraging. Indeed, the group’s performance over the past nine months has been robust, supported by strong first-half results which revealed that average gross profit per customer had increased by 12 per cent. While progress may well slow in the final three months of its financial year, especially as revenues are historically higher in the second half, its May trading update suggests that it should be able to drive overall growth. 

Managing director Colin Brown took the opportunity to sell shares worth £1.3m in two transactions on June 4 and 5. Softcat declined to comment on the sale.

While the group has managed to keep up growth in a difficult trading environment during the third quarter, it is especially vulnerable to economic and fiscal movements as it deals with both public and private clients. It is no wonder that the company cancelled its half-year dividend just two weeks after the release of its half-year results, in a move to protect its cash position.

Directors’ Deals, June 11 2020
CompanyDirector/PDMRDateNo. of sharesPrice (p)Aggregate value (£)
BUY     
GetBusyMiles Jakeman01-Jun-20150,0006496,000
International Personal FinanceStuart Sinclair (ch)04-Jun-2086,9445749,558
Braveheart Investment GroupTrevor Brown05-Jun-20972,38517165,306
Lok'nStoreCharles Peal05-Jun-207,20049835,856
Lok'nStoreAntonia Peal05-Jun-207,20049235,424
SELL     
AvastUlf Claesson04-Jun-20250,000486.891,217,225
XP PowerAndy Sng04-Jun-207,9003,557281,003
SSPGail Davies04-Jun-20300,000315.5946,493
SoftcatColin Brown4-5 Jun 20120,0001,1111,333,024
ClinigenJohn Hartup05-Jun-205,0008.86544,325
JD SportsPeter Cowgill05-Jun-201,985,000671.7713,334,635
Young & CoPatrick Dardis (CEO)08-Jun-2010,5001,110116,550
Young & CoTorquil Sligo-Young08-Jun-2010,00072572,500
Aston MartinAmr Ali Abdallah Abouelseoud08-Jun-20300,00078.93236,780
Kainos GroupPaul Gannon08-Jun-20115,0008.659,950
Kainos GroupPaul Gannon08-Jun-201,5008.3125
Source: Investors Chronicle-----

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