JD Sports Fashion reported some softening in trade in its North American business in June, but this would be offset by growth in demand in the UK, Europe and Asia Pacific – allowing it to maintain annual guidance. Despite the US and Canadian markets’ slowdown, the UK retailer still expects pre-tax profit to come in at about £1.04 billion (€1.16bn) for the 12 months to end-January.
The company reported positive group trading across all regions through May, with overall growth in organic sales moderating to around 8 percent, compared with 15 percent in the first three months of the year. “This moderation in growth was in line with management expectations and reflects tougher comparatives in the prior year as the supply chain normalized and the availability of product improved,” it added. The board anticipates trading to return to pre-Covid pandemic patterns, with approximately 35 percent of profits generated in the year’s first half.
JD Sports also noted competitors in North America were seeing a similar softening trend. Foot Locker in May downgraded its outlook amid a sharp drop in demand as US consumers cut back on discretionary spending. The news led to a 5 percent fall in JD Sports shares on the London Stock Exchange, but analysts at broker Peel Hunt said the stock was undervalued. “The US performance will probably catch the headlines, but Europe and the UK are in rude health and have picked up any bottom-line slack,” they wrote.
JD Sports said it is still committed to its ”JD First” and global growth strategy, having opened a net additional 32 JD stores in the first four months of 2023, and is on track to surpass its target of opening over 150 over the course of the year.
In its North American business, JD said inventories were at normal levels, and it would not be more promotional than it needed to be to stay competitive.
Analysts at Shore Capital said that while macroeconomic challenges were still a factor, they remained positive on the company’s outlook due to its strong structural position. “The company’s robust balance sheet allows it to out-invest its peers, particularly in the US market. Furthermore, JD’s recent acquisition of Courir provides the critical mass needed to compete effectively in the European market,” they said.
