JD Sports’ profit warning highlights consumer spending woes

Nearly £2bn was wiped off JD Sports Fashion’s market value on Thursday, after the British sportswear giant warned on annual profit, citing tepid consumer spending that bruised peak season sales and led to heavy discounting.

The retailer, which sells Nike, Adidas and other sports fashion ranges, said softer demand and more promotional activity than expected dented gross margins in the peak 22-week period ended December 30.

It now expects profit before tax of £915m-£935m for the year ending February 3, down from a previous forecast in line with market expectations of around £1.04bn.

Shares in the company, among the first non-food retailers to issue a post-holiday trading update, recorded its steepest fall of 24.2% to 117.85p, becoming the top loser on London’s blue-chip FTSE 100 index. The stock had gained about 25% since its half-year results announcement up to year-end, as investors bet on the group’s expansion across North America and Europe.

JD’s warning echoes similar statements from Adidas and Puma who have been grappling with staggered apparel sales amid warmer weather, while footwear demand has remained steady. Apparel retailers like H&M and Superdry also flagged a slower start to the autumn-winter season as people held off from buying knitwear.

Last month, Nike trimmed its annual sales forecast blaming cautious consumer spending, a weaker online business and more promotions.

Shares of sportswear firms Nike, Adidas, Puma and others were down on Thursday.

“The consumer is cautious and looking for a deal and with no especially exciting launches, it has been a dullish period,” Peel Hunt analysts said.

JD said its like-for-like organic revenue increased 1.8%, slightly less than expected, for the reported period.

The group expects full-year organic revenue growth of about 8%, compared with the 12% growth it posted last year.

Reuters