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(Sharecast News) - Shares in JD Sports were rising strongly on Friday on the back of hopes of a rebound at Nike, following the American sportswear giant's results released overnight, with Shore Capital showing optimism about positive readacross for the UK retailer.
With Nike products representing a significant share of sales at JD, weaker US results at Nike have already been reflected in recent trading at the high street chain, with JD's North American like-for-like sales down 5.5% in the three months to end of April.
Nevertheless, while Nike's full-year revenues were down 10%, sales for its fourth quarter to end-May were comfortably ahead of market forecasts.
"While there is clearly still work to be done on Nike's recovery, the company expects an improving trend in the first quarter to just mid-single digit revenue decline. This is expected to be particularly driven by the challenging Chinese market which is expected to take longer to return to growth, while Nike sees better momentum in the US and Europe," said Shore Capital analyst David Hughes.
While the brand continues to struggle in its D2C business, the view on wholesale partners like JD is more optimistic, with an improving order book and growth in seasonal orders, Hughes said.
"Overall, the double-digit sales decline for Nike has undoubtedly been a significant headwind for JD and there is still more work to do before the company sees a return to revenue growth and in continuing to clean the inventory position. However, with this update we do see early signs of an improving wholesale channel. Such an improvement in wholesale (particularly in the US) is key for JD's to see a return to American growth."
A return to LFL growth in the US should drive a re-rating in JD's stock.
Shares were up 6.5% at 87.04p by 0959 BST.
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