US Edition JD Sports
37½p -64p
Questor says Hold
You see Peter Cowgill, chief executive of branded sports wear company JD Sports, warned that his customers are beginning to suffer from public spending cuts, wage freezes and high inflation.
Although the Bury-based company reported a 28pc rise in full-year profits to £78.6m, it warned it was "extremely cautious" about the coming year's trading.
"There's a gloom and doom around the market," Mr Cowgill said. "Consumers are saving a bit more in the face of job insecurity. If parents are being prudent, there's not as much to go around."
Mr Cowgill said that as inflation continues to outpace pay rises, his customers have been left with less cash in their pockets.
At the same time JD is being squeezed by the rising cost of clothes, a sizeable proportion of which are bought overseas (which means they are more expensive because of the weakness of sterling).
Mr Cowgill also hit out at the Government's increase in VAT to 20pc from 17.5pc, which he described as a "tax on spending".
"The fact is that any retailer who takes the same money through the tills this year as last year will pass a significantly greater slice to the Treasury," he added.
Mr Cowgill said JD was trying not to pass the burden on to customers because that would discourage them from shopping.
The company said it had "largely absorbed" the VAT rise, but at a £16m cost to this year's turnover.
Mr Cowgill said he did not expect JD to be particularly badly affected by the Government's cut to jobseeker's allowance and other benefits.
Although the company is favoured by the nation's down-at-heel youth market, Mr Cowgill said it was "cheeky" to suggest that JD had a higher than average proportion of unemployed customers. "[Customers receiving state benefits] account for a lot of retail spend," he said.
"We are not immune to it, and our customers are predominantly in the youth sector."
The warning caused a 7pc drop in the company's share price to 837½p, but Mr Cowgill said investors and analysts had read too much into his forward-looking statement.
"We provide quality clothing to image-conscious and style-conscious people at the right price. There seems to be a very strong appetite for what we provide and we try our utmost to be competitive in every sphere. If you're not buying it you're missing out."
Analysts at Investec said they were "positively surprised" by the results but warned: "Management is highlighting the difficulty of passing on VAT and cost increases to its customers, so we are cutting full-year forecasts by £9m to £72m to reflect assumed gross margin pressure."
Questor recommended JD at 594p in 2009. If you still have them, hold on to them for now, because, as those kids on the corner will tell you, one can never have enough white trainers and low-slung tracksuit bottoms.
Questor says hold.