JD Sports PLC vs Frasers Group PLC: Financial Analysis 2025

1. Introduction

The report is mainly concerned with the financial and investment appraisal of JD Sports Fashion plc and its direct competitor – Sports Direct. JD Sports with its headquarters in the United Kingdom is a prominent sports fashion and outdoor brand store chain operating through 4,500 stores across 36 global destinations (JD Group, 2025). Sports Direct is a UK-based retail store dealing in sports and lifestyle products which is operated by Frasers Group and has several stores (Sports Direct, 2025). These companies are chosen as the direct competitors based on the grounds of the industry segments that they operate in, geographical locations and portfolio of products and services offered. The potential acquisition decision analysis will include financial analysis of the acquiree, investment appraisal, and funding strategies.

2. Ratio calculation

2.1 Comparison between two company

Figure 1: JD Sports Fashion plc ratio and horizontal & vertical analysis

(Source: Self-Created)

Figure 2: Frasers Group plc ratio and horizontal & vertical analysis

(Source: Self-Created)

Profitability Ratios:

Gross Profit Margin: JD Sports achieved a higher gross profit margin than Frasers Group with emerging numbers like 49.14% of the gross profit margin in 2022 while Frasers Group had 43.27%. For 2023 and 2024, JD Sports achieved astoundingly high margins of 478.16% and 478.94% respectively; which should be viewed as data outliers or impeccable revenue management (Referred to Figure 1). Going by horizontal analysis there has been a steep rise for JD Sports from 2020, the increase being in the region of 431.12% (Wsj.com, 2025). These figures illustrate that JD Sports has a tremendous prospect of managing costs and revenue Constraining a potentially transformative financial strategy.

Net Profit Margin: At the end of 2024, the maximum profitability value reached 327.13% in JD Sports and only 7.10 % in Frasers (Referred to Figure 2). At JD.com, the margins soared higher, and the company demonstrated much-improved cost control and revenue management. Frasers, though steady, observed less growth proportional to it as compared to the other conglomerates (Wsj.com, 2025). The net-profit margin which clearly shows the profitability and efficiency of JD Sports in contrast to Frasers group in this period.

ROE: Key performance indicator analysis based on the Frasers Group PLC and JD Sports Fashion PLC data figured out that the former consistently reported better Return on Equity (ROE) than JD Sports in the period 2020-2024, which testifies to its higher profitability and equity efficiency (Wsj.com, 2025). Frasers’ ROE rose to 24.64% in the 2020 financial year much higher than 302.03 % in the 2023 financial year and slightly below 206.51% in the 2024 financial year. Conversely, JD Sports dropped slightly from 19.10% in 2020 and increased to 27.96% in 2022, but decreased to 18.76 % in 2024 (Referred to Figure 1). The first of the two ratios, the ROE for JD Sports shows that there is fluctuation in the utilization of equities as compared to the other ratio that there is consistency in Frasers group.

Liquidity Ratios:

Current Ratio: While evaluating the hazard, Frasers Group was found to be in a better position with some ratios being 2.62 in 2020 and 2.57 in 2024 as against the ratios of 1.96 in the year 2024 of JD Sports (Yahoo.com, 2024). This means, that currently, Frasers is more efficient at providing for its short-term obligations. Regarding the horizontal trends, JD Sports also gains (+ 0.78 from 2020 to 2024) but on average for three years is still behind Frasers (Referred to Figure 2).

Quick Ratio: JD Sports was more efficient than Frasers for the quick ratio; it registered 3,037.76% in 2024 while Frasers stood at 2,474.62%. This shows that JD Sports has control over inventory compared to liabilities (Annualreports.com, 2024). The quick ratio has been spectacular for JD Sports at 2024 reveals efficient management of inventory than that of Frasers’ total quick ratio.

Risk Ratios:

Debt-to-Equity Ratio: Finally, JD Sports again demonstrated improvements in leverage management in 2024 with a ratio of 0.73 to Frasers with a ratio of 0.44 but both ratios were declining (Yahoo.com, 2024). Hence lower numbers are interpreted to mean lower levels of financial risk (Referred to Figure 1). Both firms’ declining debt to equity ratios show that they have adopted sound financial risks management for the analysed period.

Interest Coverage Ratio: Although Frasers Group had an operating profit of 5.72 while JD had 6.38 in the year 2020, JD became even worse at 0.90 in the year 2024 depicting a poor ability to cover interest expenses (Annualreports.com, 2024). The interest coverage ratio of JD Sports is gradually decreasing, implying that the group has a weaker ability to meet interest payments and this will call for some financial strategy.

Management Efficiency Ratios:

Inventory Turnover: In 2020 it was at 4.02 while that of Frasers was 2.16, but reduced to 0.69 in 2024. The dropping rate incremented maturely and Frasers got 2.34 of special ability in 2024.

Asset Turnover: Liquidity ratios depicted that JD Sports always had better asset utilization given that it was 1.40 (2020) in comparison with Fraser’s 1.02 for the same year but dropped significantly to 0.13 in 2024. Yearly, Frasers had kept on enhancing the improvement and it was 1.24 in the year 2024 (Sports Direct, 2025).

2.2 Critical analysis and discussion

Critical analysis 

The actual and respective current profitability, liquidity and efficiency are quite observed to be hugely different between the manufacturers Frasers Group and retail trader JD Sports where the above results are a consequence of some factors beyond ratio analysis calculations. For example, the gross profit margin of JD Sports recently augmented between 2020 and 2024 and it reached the level of 478.94 % in 2024 which may indicate excellent cost control or change like the goods sold mix (Annualreports.com, 2024). Still, such extraordinary growth may signal data anomalies or distortions in or around revenues and/or related accounts. On the other hand, Frasers showed a consistent gross margin of about 43% proving good cost management but appealing profitability margin (Referred to Figure 2). Equally, this shows that JD Sports ROE decreases continuously from 27 (Referred to Figure 1). 96% in 2022 to 18. 76% in 2024, which means either the equity level is diluting the returns or the net profit margin is decreasing. Frasers’ ROE increases to 302.03% (2023) which can be highly probably a result of either a one-off income or highly leveraged equity. Measures of liquidity and quick ratio also give an advantage to JD Sports to mean better handling of inventory and liabilities (Annualreports.com, 2024).

Discussion of Other Considerations

The fundamentals responsible for these financial trends are related to economic and market factors. The downward trend in the gross profit margin in previous years for both concerns could be attributed to a rise in energy costs, which raises production and distribution expenses (JD Group, 2025). Inflation also increased putting more pressure on both firms in the sense that they felt the heat on operational costs and buying powers of the people (Yahoo.com, 2024). Therefore, for JD Sports, it could argue that a decrease in net profitability might be due to decreased customer traffic and competition from locked-down value retailers as consumers tightened their belts during lockdowns (Yahoo.com, 2024). Leveraging or one-time gains could easily inflate Frasers’ ROE if core profitability is not sufficient to sustain high ROE, then it may be hard for Frasers to maintain such levels (Yahoo.com, 2024). On the other hand, the reducing value of JD Sports’ inventory turnover means that demand for products has decreased or the company overstocks it for some reason. Mainly, these financial movements are attributable to macroeconomic factors, competitive forces, and cost increase factors.

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3. Investment appraisal

3.1 Proposed calculation of NPV & IRR

Figure 3: NPV, IRR and payback

(Source: Self-Created)

Based on the financial analysis, the following insights can be made for JD Sports Fashion plc:

Net Present Value (NPV):

The value of Net present value shows that the investment will be valuable for the company equal to £9,761. This means that when you discount the expected future cash inflows by the company’s cost of capital of 16% the value is higher than the investment made (Margana, 2024). This implies that the project has the prospect of generating actual profits (Referred to Figure 3).

Internal Rate of Return (IRR):

The IRR of -11% is less than the firm’s required return of 16%. A negative IRR generally means that the project might not return more than the cost of capital, and can even prove to be dilutive to the firm (Referred to Figure 1). This raises the concern that the other financial performance expectations put forward by the project might not be met with the necessary ambition as is set by the IRR benchmark which should optimally transpire higher than the discount rate.

Payback Period:

The found value for the payback period is 3.21 which therefore means that the company would be able to recover it is initial input in 3.21 years (Liu, 2024). Although it shows the period that is taken to recover the cost of the investment the PMT analysis does not include the time factor where most prefer the money now than some time in the future (Referred to Figure 3). As it is clear, the payback period offers only a restricted perspective of the financial feasibility of the project (Saragih, 2024).

Overall, NPV shows that the project might generate value while IRR shows that the project returns might not meet the company JD Sports hurdle rate and payback shows that while the project is quick to pay back it might not be the most profitable in the long run. More research would be necessary to make such relative costs assessment.

4. Funding the Acquisition

4.1 Sources of Funding to raise the required £1.2 billion

There are various means through which JD Sports Fashion plc can source the £1.2 billion to fund the acquisition of Sports Direct. These are equity financing, debt financing and Hybrid financing each comes with its merits and demerits.

Equity Financing: Equity financing means issuing shares with the purpose of raising capital in the business. JD Sports could be able to get the required £1.2 billion by floating out new shares in the market or shareholders’ stocks. The company owns a market capitalisation of £10.5 and has a good market base thus can be able to launch shares. This would water down the holdings currently owned by the shareholders (JD Group, 2025). With reference to the concept of dilution threat, it is thus important that JD Sports be in a position to show how it can unlock value from the acquisition such as growing markets in North America and Asia Pacific. Equity financing also has the added advantage of not envisaging the company into deeper debt (Shalaby, 2024). JD Sports is in the retail business and has above 90k employees which means it can attract both qualified institutional buyers and other small or individual buyers (Atrill and McLaney, 2019).

Debt Financing: Debt financing enables JD Sports to be able to come up with the £1.2 billion in the form of cash by taking loans or issuing bonds. JD Sports is financially sound, and has an annual turnover of £10.5 billion and a pre-tax profit of £917.2 million; therefore, it can borrow funds from the banks or investors (JD Group, 2025). JD Sports could issue bonds, get a low-interest loan and then sell bonds for several years to repay the loan. Besides corporate bonds, which JD Sports could certainly consider, the firm could also consider other debt securities that include term loans or revolving credit lines from commercial banks (Yuqi and Iryna, 2024). While this option has the risk of JD Sports needing to borrow and service the debt and also guarantee that the acquisition will be profitable enough to, at least, service the interest on the debt let alone repay the principal amount.

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Hybrid Financing (Convertible Bonds): Hybrid financing has both qualities of equity and debt financing at the same time (Pitluck, 2022). JD Sports may utilise convertible bonds which are simply debt and can be converted into equity at some time especially when the share prices have risen. Issuing convertibles to JD Sports would let the firm tap the £1.2bn needed without diluting shares immediately, though a conversion option is available if the acquisition yields the highest returns. Perhaps this method could be greatly appealing to investors as it seeks to combine the two forms of financing that is; debt financing and equity financing.

4.2 Implications of Funding Options

Analysing the potential sources for the £1.2 billion acquisition the key issue for JD Sports is to weigh up all the financial pros and cons as well as the non-financial benefits of each of the methods.

Financial Impact

Cost of Capital: Every method of financing has a particular cost related to raising capital. Equity financing reduces the control of existing shareholders but does not attract interest costs and brings no liability on the balance sheet (Zhang et al., 2021). This makes it less risky, however, it must be said that in certain circumstances it is very expensive and may lead to dilution. Since JD Sports reported its revenue of £10.5 billion and has good sales/earnings, the new share would possibly be favourable for investors (JD Group, 2025). Funding through equity would increase the cost of capital in the long run because it reduces the value of shareholders’ stakes since investors demand better returns on their equity investment.

Debt financing: Debt financing, on the other hand, costs less if JD Sports can get a low interest rate owing to its good cash flow position. Considering JD Sports has a pre-tax profit of £917.2 million, it is in a good place to fund financing via debt at cheap rates (JD Group, 2025). This option would increase the companies’ leverage and thus may create problems of future servicing of the debts among investors and creditors. There is a strong relationship between financial risk and the acquisition decision: Acquiring more firms increases the financial risk for the acquirer, especially if the acquisition does not generate the expected profit (Pinelli et al., 2024). Convertible bonds provide an opportunity for JD Sports to fund itself without having a direct negative effect on its capital structure since the notes might become equity in the future.

Non-Financial Considerations

Shareholder Control: The major disadvantage of equity financing is that the control of the existing shareholders is diffused. This may have an impact on management actions and organisational goals and plans. On the other hand, debt finance does not reduce the shareholders’ control since the possession of shares remains in the company’s custody (Tayachi et al., 2023).

Brand Reputation: JD Sports does have its core values that include ethics, and empowering communities. This might affect the company’s brand image since the way it would fund the acquisition is another consideration which was covered before (Erjansola et al., 2021). The main one is equity financing which could be seen as a positive, for it suggests that the company knows how to attract investors and share information about its financial state.

Recommendation

Based on the financial position of JD Sports, it is probable that the key to the perfect solution is equity and debt financing. This would let JD Sports obtain the required £1.2 billion without overgearing and retains shareholders’ control. Equity financing would indicate that the need for financial flexibility would always be met, while debt financing would ensure that the cost of capital remains low (Arhinful et al., 2024). Available in the middle ground is hybrid financing that combines features of both, for instance, the convertibles that should help to minimise the dilution and at the same time avoid high leverage.

5. Conclusion and Recommendations

JD Sports has a low, yet smoothly evolving, debt load and vastly outperforms Frasers Group across most subcategories within profitability and liquidity analyses. Revenue analysis shows that JD Sports has efficient revenue control while the profitability analysis shows that it has a varying profitability performance over the last few years. The proposed International Sports Company the acquisition of Sports Direct should have a specific funding strategy capable of combining equity, debt and any other hybrid instrument. Both equity and debt sources of funds should therefore be used with the view of reducing the level of shareholder dilution and at the same time ensuring that funding flexibility is not hampered. Leverage risks could also be managed by researching convertible bonds. This creates strategic balance in separate markets and is in harmony with JD Sports’ financial capabilities and its long-term objectives.

6. References

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Arhinful, R., Mensah, L., Amin, H.I.M. and Obeng, H.A., (2024) ‘The influence of cost of debt, cost of equity and weighted average cost of capital on dividend policy decision: Evidence from non-financial companies listed on the Frankfurt Stock Exchange,’ Future Business Journal, 10(1), p.99.

Atrill, P. and McLaney, E (2019). Accounting & Finance for Non-Specialists. 11th Edition, Pearson. [ebook available via Bibliu and Perlego] – Chapter 6

Erjansola, A.M., Lipponen, J., Vehkalahti, K., Aula, H.M. and Pirttilä-Backman, A.M., (2021) ‘From the brand logo to brand associations and the corporate identity: visual and identity-based logo associations in a university merger,’ Journal of Brand Management, 28, pp.241-253.

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Liu, M., (2024). ‘Research on investment project evaluation: Comparative analysis based on NPV and IRR’. Highlights in Business, Economics and Management, 24, pp.1133-1138.

Margana, R.R. and Syaefulloh, S., (2024). ‘ANALISIS KELAYAKAN INVESTASI PROYEK PENGADAAN ALAT PENGEMBANGAN CHAMBER BALAI UJI DENGAN MENGGUNAKAN NET PRESENT VALUE, INTERNAL RATE RETURN DAN PAYBACK PERIOD DI PT DEF’. Jurnal Lebesgue: Jurnal Ilmiah Pendidikan Matematika, Matematika dan Statistika, 5(2), pp.1143-1153.

Pinelli, M., Chirico, F., De Massis, A. and Zattoni, A., (2024) ‘Acquisition relatedness in family firms: Do the environment and the institutional context matter?’ Journal of Management Studies, 61(4), pp.1562-1589.

Pitluck, A.Z., (2022) ‘Beyond debt and equity: Dissecting the red herring and a path forward for normative critiques of finance,’ Focaal, 2022(93), pp.60-74.

Saragih, N.E. and Hanggraeni, D., (2024). ‘The Risk Management And Usage Of The Net Present Value-At-Risk To Evaluate Indonesian Toll Road’. EKOMBIS REVIEW: Jurnal Ilmiah Ekonomi dan Bisnis, 12(4), pp.3407-3416.

Shalaby, A., (2024) ‘Digital Sustainable Growth Model (DSGM): Achieving synergy between economy and technology to mitigate AGI risks and address Global debt challenges,’ Journal of Economy and Technology.

Sports Direct (2025). SportsDirect.com – The UK’s No 1 Sports Retailer. Available at: https://www.sportsdirect.com/. [Accessed on: 11th January, 2025]

Tayachi, T., Hunjra, A.I., Jones, K., Mehmood, R. and Al-Faryan, M.A.S., (2023) ‘How does ownership structure affect the financing and dividend decisions of firm?,’ Journal of Financial Reporting and Accounting, 21(3), pp.729-746.

Wsj.com, (2025), Frasers Group PLC, Available at: https://www.wsj.com/market-data/quotes/UK/XLON/FRAS/financials/annual/balance-sheet (Accessed: 11 January 2025)

Wsj.com, (2025), JD Sports Fashion PLC, Available at: https://www.wsj.com/marketdata/quotes/UK/XLON/JD/financials/annual/income-statement (Accessed: 11 January 2025)

Yahoo.com, (2024), Frasers Group Plc (SDIPF), Available at: Frasers Group Plc (SDIPF) Balance Sheet – Yahoo Finance (Accessed: 11 January 2025)

Yahoo.com, (2024), JD Sports Fashion Plc (JD.L), Available at: https://finance.yahoo.com/quote/JD.L/balance-sheet/ (Accessed: 11 January 2025)

Yuqi, L. and Iryna, I., 2024, June. DEBT CAPITAL OF AN ENTERPRISE: SOURCES FOR ITS FORMING AND WAYS OF ITS USAGE,’ In The 22nd International scientific and practical conference “Actual problems in education and introduction of new technologies”(June 04–07, 2024) Stockholm, Sweden. International Science Group. 2024. 388 p. (p. 36).

Zhang, R., Li, Y. and Liu, Y., (2021) ‘Green bond issuance and corporate cost of capital,’ Pacific-Basin Finance Journal, 69, p.101626.