JD Sports shares sank on Thursday after the sportswear retailer announced a poor trading period that would impact full-year profits.
JD Sports has announced that, following challenging trading conditions in October, it expects full-year profits to be at the lower end of its previous guidance range of £955-1035 million.
The sports fashion retailer cited softer consumer demand and increased promotional activity in the market as key factors affecting performance.
JD Sports shares were down 9% at the time of writing.
The company reported mixed results in its third-quarter trading update, covering the 13 weeks to November 2, 2024. While the back-to-school period showed strength, the latter part of the quarter saw weakened consumer demand, particularly in the US, where spending appeared suppressed ahead of the upcoming election.
With JD Sports heavily reliant on Nike for new products, Nike’s recent troubles with sales and its share price will have also affected both JD Sports trading activity and sentiment around the stock.
“Nike’s recent struggles are creating uncertainty for JD Sports. Our experts say JD relies on Nike’s strength since its products typically have higher price tags than other brands, helping boost profits,” said Yanmei Tang, Analyst at Third Bridge.
“More margin volatility is inevitable as other brands gain more shelf space in stores. These brands usually have shorter product life cycles, leading to increased promotional activity.”
Despite these headwinds, the group maintained its focus on margin management, achieving a slight increase in gross margin of 0.3 percentage points to 48.1%.
The retailer’s expansion strategy remained robust, with organic sales growth reaching 5.4% during the period, driven by an aggressive store rollout programme. However, like-for-like sales declined by 0.3%, with strong performance in August and September offset by a weaker October. Physical stores outperformed online channels, while footwear sales yielded better results than apparel.
“Trading volatility picked up in October, particularly across North America and the UK, leading to increased discounting in the sector to help keep tills ringing,” said Aarin Chiekrie, equity analyst, Hargreaves Lansdown.
“JD’s been reluctant to offer the same level of promotion as the competition, which has helped to protect its margins. But it’s also meant sales growth has slowed over the third quarter and full-year profits are now expected to come in at the lower end of previously downgraded guidance.”
Regionally, European operations demonstrated resilience, delivering both like-for-like and organic sales growth, while other markets experienced more challenging conditions. The company continued its expansion plans, opening 79 new JD stores during the quarter, bringing the total store count to 4,541, including 1,179 locations acquired through the Hibbett acquisition.
JD Sport is heavily reliant on new stores for growth, so suggestions that it is struggling to find the appropriate sites to facilitate this growth strategy will be an additional turn off for investors.
“JD Sports is finding it tough to translate its UK success to international markets. It’s grappling with site availability in Italy, affordability issues in Eastern Europe, and tricky market conditions in the US,” said Tang.
The company noted that its acquisition of Courir is nearing completion, which will add a female-oriented retail chain to its portfolio, further diversifying its market presence.