LONDON (ShareCast) - (Sharecast News) - Shares in JD Sports Fashion fell on Wednesday on the back of a sharp fall in sales at Nike - its major partner - despite a better-than-expected 2% rise in half-year profit and guidance hold amid a "challenging and volatile market".
The company reported profit before tax and adjusting items of £405.6m for the six months to August 3, compared with £398m a year earlier and consensus expectations of £384m. Shares in the firm were down more than 5.5% in London.

Trading in the UK was hit by weaker sales after attacks on Red Sea shipping by Houthi rebels based in Yemen hit deliveries, while a wet spring and early Easter reduced demand for camping equipment and clothing, impacting the Millets and Blacks chains, with sales down 5.3%.

Sales at established stores were down 4.6%, also due wet weather over the summer. This "dampened footfall and full price demand" for seasonal clothing ranges, JD added.

Profits were boosted by a 10-day contribution of £13m from the acquisition of US sports fashion retailer Hibbett, without which earnings were flat on a constant currency basis. Sportswear brands, such as Nike - a major partner of JD Sports - have reported weak sales growth.

Nike shares also fell sharply after the sportswear retailer withdrew its annual revenue forecast and posted a 10% drop in first-quarter revenue.

HIBBET HELPS TO BOOST EARNINGS

Revenue jumped 5.2% to £5bn. Organic sales growth was 6.4%, comprised of 0.7% like-for-like sales growth and 5.7% from net new space. Hibbet, bought in April for £900m, now represents around 40% of group revenue and is expected to contribute £25m to full-year profits.

Overall earnings guidance range of £955m - £1.03bn remained unchanged, JD Sports said.

The retailer opened 83 new stores globally and was confident in its growth strategy, with plans to open around 200 new stores by year-end. Chief executive Regis Schultz is eyeing a large expansion into the American market, with around 700 new stores planned over the next four years.

Aarin Chiekrie, equity analyst at Hargreaves Lansdown said: "After a tough period of volatile conditions and missing market expectations, JD Sports looks to be back on the front foot. Recent retail sector data had pointed to increased discounting at shops to help keep the tills ringing."

"While that's good news for customers, it's not typically good for retailers who tend to feel the effect of increased price cuts on their profit lines. But filling the racks in JD's stores are exclusive items from the likes of Nike and Adidas."

Chiekrie said the Hibbett purchase was "massive" and would increase the group's store count by around a third.

"That means there are serious growth opportunities ahead if JD can nail its execution. The valuation's still a long way below its long-term average, which looks like an attractive entry point for investors willing to bet on and upturn in the retail sector."

Reporting by Frank Prenesti for Sharecast.com

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