JD Sports Fashion warned full-year profits would be at the lower end of forecasts after a “volatile” trading environment in October due to higher discounting, milder weather and consumer caution ahead of the US election. Third quarter like-for-like sales fell by 0.3 percent, while organic group revenue was up 5.4 percent, the company said in a trading update, which sent its shares 15 percent lower in London at one point. JD Sports forecast annual profit before tax and adjusting items in a range of £955 million–£1.035 billion (€1.14bn–€1.24bn).
Regionally, like-for-like sales fell 2.4 percent in the UK, 1.5 percent in the Americas – where it has 1,200 stores – and 3.8 percent in Asia Pacific. Europe bucked the trend with a 3.5 percent increase in the 13 weeks to November 2. Same-store sales were 0.3 percent lower across the group in the quarter. Store sales continued to outperform online trading, while footwear also fared better than clothing. All segments achieved organic sales growth during the period, driven by new space growth in JD and Complementary Concepts and underlying sales growth in Sporting Goods & Outdoor.
“We had a strong back-to-school period but we saw much softer consumer demand and trading toward the end of the period, reflecting elevated promotional activity, unseasonable weather and a cautious consumer, with evidence supporting suppressed demand in the US ahead of the election,” said Chief Executive Regis Schultz. “Against this backdrop, we maintained our operating discipline to deliver on our long-term commercial strategy rather than a short-term sales focus.” As a result, Schultz said, gross margin increased 0.3 percentage points to 48.1 percent, with the year-to-date figure now at 48.2 percent, in line with the corresponding period. In October, the company moved to calm investors after Nike – its major partner – reported a sharp fall in sales, which had a knock-on effect on JD Sports shares. In the latest update, Schultz said it was “well positioned for the upcoming peak season.”
Store sales continued to outperform online trading, while footwear also fared better than clothing. JD Sports opened 79 new shops in the third quarter, with 181 in its financial year so far, taking the global total to 4,541 – including about 1,180 added from the $1.1 billion acquisition of US retailer Hibbett. The company said it had also made good progress completing the acquisition of French chain Courir and anticipated the deal would be completed shortly, after satisfying all regulatory conditions – “adding a strong and growing, female-orientated fascia to complement our global portfolio.”
Aarin Chiekrie, equity analyst at Hargreaves Lansdown, said the company would have to work hard to drive sales higher. “JD’s been reluctant to offer the same level of promotion as the competition, which has helped to protect its margins. But it’s also meant sales growth has slowed over the third quarter. Looking past this softness, JD’s thinking ahead and continuing to expand its footprint through acquisitions and new store openings. The French company Courir is next on the shopping list for JD, and it’s making good progress in completing the acquisition after meeting all regulatory conditions.” Chiekrie added that the company could be taking a risk by expanding capacity ahead of market recovery. Still, the move “could pay dividends down the line when market conditions and consumer confidence improve.”
