- Another quarter of like-for-like decline
- Pre-tax profit guidance cut again
- Nike’s problems a headwind
Recent downward momentum in JD Sports Fashion (JD.) continues, with shares in the self-styled ‘King of Trainers’ tanking on another year-to-January 2025 profit guidance downgrade.
This follows slower sales over the Christmas period for the FTSE 100 tracksuits-to-football shirts seller. With weak trading conditions expected to continue, JD Sports Fashion also warned it is ‘taking a cautious view of the new financial year’.
The gloomy outlook sent the stock down more than 10% to 86.5p, close to the lows seen in the midst of the global market sell-off when the Covid pandemic gripped the world in 2020.
CHALLENGING CHRISTMAS
Having already guided down full-year expectations in November, JD Sports Fashion now says profit will be even lower thanks to weak trading in the UK and US.
The retailer suffered a 1.5% like-for-like sales decline across November and December in a ‘challenging and volatile market that saw increased promotional activity’, though a stronger Christmas did result in 1.5% like-for-like growth in December.
By region, Europe and Asia partially offset weaker trading in the UK and North America, while stores continued to outperform online and footwear continued to outperform apparel in the nine weeks to 4 January 2025.
Encouragingly, JD Sports Fashion continued to generate cash and maintained its promotional discipline despite the tougher trading backdrop, which means full-year gross margin is expected to be in line with last year at around 48%.
CEO Regis Schultz said: ‘In line with our proven long-term approach, we chose not to participate in what was a more promotional environment in the period than we anticipated, fully maintaining our trading discipline to deliver gross margins ahead of last year, clean inventory and strong cash management.’
DOWNGRADE DISAPPOINTMENT
Schultz added: ‘While I am pleased overall with our performance, market headwinds were higher than we anticipated and therefore our full-year profit forecast is slightly below our previous guidance.’
On the back of weak like-for-like growth, JD Sports Fashion trimmed its full-year 2025 pre-tax profit forecast from the lower end of £955 million to £1.035 billion to between £915 million and £935 million.
Quilter Cheviot analyst Mamta Valechha observed 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 (NKE:NYSE). 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.’
Valechha added: ‘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.’
