JD Sports downgrades FY profit forecast
By Michele Maatouk
Date: Tuesday 14 Jan 2025
(Sharecast News) - JD Sports Fashion downgraded its full-year profit forecast on Tuesday as it posted a drop in revenue for November and December in challenging markets.
In an update for the nine weeks to 4 January, the retailer said like-for-like revenue across the two months fell 1.5% "in a challenging and volatile market that saw increased promotional activity".
The company said its Christmas performance was strong, with LFL revenue in December up 1.5%. Footwear sales grew and outperformed apparel, and stores outperformed the online channel.
The Sporting Goods and Outdoor segment saw a strong LFL revenue performance through the period, while LFL revenue growth in Europe and Asia Pacific partially offset weaker LFL trading across the UK and North America.
LFL revenue in the year to date is flat, it said, and the retailer expects the full-year outcome to be similar.
Organic revenue growth in the nine-week period was 3.4% and JD expects full-year organic revenue growth to be around 5%.
The group now expects full-year pre-tax profit of between £915m and £935m, down from previous guidance of £955m to £1.035bn.
JD Sports had already warned in November last year that full-year profits would be at the lower end of forecasts after a "volatile" trading environment in October due to discounting, milder weather and consumer caution ahead of the US election.
Chief executive Régis 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.
"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. With these trading conditions expected to continue, we are taking a cautious view of the new financial year."
At 0930 GMT, the shares were down 11% at 86.10p.
Matt Britzman, senior equity analyst at Hargreaves Lansdown, said: "The retail powerhouse has been pushing on with expansion plans into what looks like a difficult market, and with performance starting to dip, there will no doubt be question marks around that strategy."
Russ Mould, investment director at AJ Bell, said: "JD Sports was once a collector's favourite, a place to snap up the latest trainers and keep them pristine in the hope their value would rocket. The company has now become a collector of profit warnings. Having already guided down full-year expectations in November, JD now says profit will be even lower thanks to weak trading in the UK and US.
"That's triggered another sell-off in the share price and taken the stock close the lows seen in the midst of the global market sell-off when the Covid pandemic gripped the world in 2020.
"Chief executive Régis Schultz joined as the cool cat boss in 2022 and a year later unveiled his plans for JD to be a 'leading global sports-fashion powerhouse'. His nine lives are nearly up as the business has spluttered under his leadership and the goal of achieving £1 billion profit has been kicked further down the road. The share price has fallen by a third since he become CEO and investors will be losing patience fast.
"The board must be seriously thinking about a replacement leader. If a different CEO isn't on the cards and the share price continues to weaken, the company could be a prime takeover target for either a retail rival looking to strengthen its position in North America and Europe or for a private equity company flush with cash and looking for a turnaround situation on the cheap."
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