JD Sports Fashion shares sank on Thursday after the sportswear retailer cut its full-year profit guidance following another difficult quarter, particularly in North America.
The slashing of guidance will be a real kick in the teeth for investors who may have thought the group was on the up as concerns around the knock-on effect of the Middle East eased.
But the company said group organic sales fell 1.3% in the 13 weeks to 1 August, with like-for-like sales down 3.1%, a slight deterioration on the first quarter.
North America, now its largest market, was the biggest disappointment, with organic sales down 4.5%, hit by softer consumer sentiment, a slower quarter for hyped “high-heat” trainers and back-to-school demand slipping from July into August.
Adam Vettese, market analyst for etoro, said: “JD Sports’ shares tumbled more than 9% this morning after a trading update that left little room for optimism. The sequential worsening in organic and like-for-like sales, particularly the sharp deterioration in North America, confirmed that the promotional and product cycle pressures management has flagged for months are not easing.
Footwear stayed soft across all regions in a heavily promotional market, though apparel and accessories and online sales, up 2.6%, held up better.
There were brighter spots elsewhere. The UK returned to modest like-for-like growth, helped by strong football replica kit sales and an improved Outdoor business, while Asia Pacific grew organic sales more than 10%.
Europe’s trend improved slightly against a still-subdued consumer backdrop.
As a result, JD lowered its guidance for full-year pre-tax profit before adjusting items to between £700m and £800m, from £750m to £850m, citing a promotional market that may persist into the second half.
Another frustration for investors may be that it’s difficult to put a finger on exactly what the issue is for JD, with both the consumer environment and problems around their offering causing concerns.
“JD could be a victim of households tightening the purse strings, though its sales issues may also be more product-specific as it found weaker demand for footwear as consumers failed to get excited about ageing product lines,” explained Duncan Ferris, Analyst, Freetrade.
It kept its free cash flow guidance unchanged at £460m to £520m and, having moved to a net cash position, pressed on with a share buyback, starting the second £100m tranche of a £200m annual programme this month.