JD Sports shares plunge after retailer warns on profit
JD Sports shares plunged more than 12 per cent this morning after the company issued a profit warning.
The FTSE 100 giant forecast full year profit before tax at between £915m and £935m, down from its previous estimate of £955m to £1.035bn.
This morning, the retail giant told markets sales fell 1.5 per cent across November and December in a “challenging and volatile market”. Revenue grew 3.4 per cent in the same period.
Revenue rose 1.5 per cent in December, below the British Retail Consortium’s market average of 3.2 per cent.
CEO of JD Sports, Régis Schultz, said JD performed well “considering the current… market”.
“Market headwinds were higher than we anticipated and therefore our full year profit forecast is slightly below our previous guidance,” Schultz said. “With these trading conditions expected to continue, we are taking a cautious view of the new financial year.”
Mamta Valechha, consumer discretionary analyst at Quilter Cheviot, said that “while JD Sports has not called out any brand in particular, it is well understood that a significant amount of the company’s woes are related to Nike.”
“In December, just before the Christmas break, Nike’s reporting saw it push its inflection point out for at least another two quarters, with the coming two quarters being clear out events.
“The supply of new franchises will be further constrained over the next few seasons, which we would expect to hinder top line momentum for JD Sports too. While Nike’s clearance is on its own digital channel, it has led to an environment where it is capturing and competing with its wholesale partners as opposed to creating and growing demand,” Valechha said.
An uncertain economic future
A turbulent economy has also affected consumer confidence, with many retailers pointing to lower footfall and fewer big-ticket sales.
Data from accountancy and business advisory firm BDO has found high street sales growth was flat at just 0.1 per cent in the final three months of 2024 – something particularly concerning for JD, where stores tend to outperform its online channel.
“After a challenging year, this low level of growth is a real concern for the retail sector,” Sophie Michael, head of retail and wholesale at BDO said.
AJ Bell head of financial analysis, Danni Hewson, has said that “consumers are worried about another round of anticipated price increases, and they’ve already demonstrated restraint.”
“The reality of a turgid economy, the impending increase to labour costs, rising bond yields and a shaky pound must all be factored in,” Hewson added.
Helen Dickinson, chief executive at the BRC, has said that the golden quarter “failed to give 2024 the send-off retailers were hoping for” after a tough Autumn.
An increase in employers’ national insurance contributions (NICs) is expected to add £2.5bn to retailers’ wage bills.
JD Sports’s chairman, Andrew Higginson, warned last Autumn that the change would lead to “guaranteed inflation” and be “too much for industry to bear”.
JD Sports said that like-for-like revenue has been flat in the year-to-date, and it expected full year like-for-like revenue “to be at a similar level to this”. It expected full year organic revenue growth to be around five per cent.