JD Sports cut its profit forecast for the second time in eight weeks, blaming deep discounts in the fashion market.
The retailer said it did not expect any sales growth at established stores during the year and warned that annual profits would not exceed £935m, down from previous hopes included between £955 million and £1.03 billion.
Shares in JD, which also owns the Size?, Blacks and Millets brands in the UK, fell 10% after it cut its forecast below previous expectations and warned of a tough economic backdrop for retailers.
JD Group Chief Executive Regis Schultz said: “As these trading conditions are expected to persist, we view the new financial year with caution. »
Sales at established stores fell 1.5% in November and December in a “challenging and volatile market which saw increased promotional activity”, with the rise in sales in the final weeks of the year not having managed to compensate for a mediocre month of November.
Trading in the UK and US was particularly weak, while its stores outperformed its online arm, in contrast to Christmas trading at other listed fashion retailers, such as Marks & Spencer and Next.
JD – which also owns the Finish Line brand in the US and SportsZone and Sprinter in continental Europe – said footwear sales were up, outpacing those of clothing, in the last two months of 2024, while chains of outdoor and camping items outperformed fashion.
JD’s poor performance comes amid a tough period for UK fashion retail, as a warm autumn and early winter dampened sales of higher-priced items such as boots and coats, while storms disrupted travel on shopping streets in many parts of the country. .
Sports brand Nike also faces competition from emerging brands and fears that athleisure styles are becoming less fashionable.
High energy bills and rising mortgage and rental costs for many continue to affect non-essential spending, while households appear to have prioritized vacations or other experiences over fashion.
after newsletter promotion
With plenty of inventory to go, many retailers started offering discounts early.
Schultz said: “In line with our proven long-term approach, we chose not to participate in a more promotional environment than expected during the period, fully maintaining our business discipline to generate gross margins ahead of last year. , cleaning inventory and strong cash flow management.
Analysts said they were also revising downward their profit expectations for next year, reflecting fears that the tough market would persist.
Analysts at Peel Hunt said they expected JD to continue to dominate the market and be among the first to benefit if Nike saw an improvement in its trading. Jonathan Pritchard, analyst at Peel Hunt, said: “JD hasn’t done much wrong – it won’t enter a race to the bottom by discounting, which would impact sales and revenue. profitability. »