JD to fall short of £1billion profit target
JD Sports is likely to miss its ambitious £1billion profit target again, blaming trading volatility in North America and the UK, mild weather and additional promotional costs.
In a third quarter trading update for the 13 weeks to 2 November 2024 issued to the stock market this morning, CEO Régis Schultz, said: “Given the volatile trading environment, and following October trading, we now expect Profit before tax and adjusting items (PBT) to be at the lower end of our original guidance range of £955-1035m. Within this full year guidance, we still expect Hibbett to contribute around £25m to PBT and, at current exchange rates, for currency to reduce PBT by £15m, compared to the rates used in setting the original guidance.”
Schultz’s update was otherwise upbeat, with positive messages about the successful store rollout programme, revealing too that organic sales growth in the period was 5.4% with year-to-date organic sales growth of 6.1%.
However, he said the more volatile environment was reflected in like-for-like (LFL) sales for the period down 0.3% with a good August and September offset by a softer October.
“We also made strong strategic progress. In the period, we opened 79 new JD stores, taking the total number of openings by the end of Q3 to 181, highlighting the ongoing success of our global JD store rollout programme. The total number of stores at the period end was 4,541, up 1,224 from the start of the year, including 1,179 stores acquired with Hibbett.
“We have also made good progress on the process to complete the acquisition of Courir. Following the satisfaction of all regulatory conditions, we now anticipate this transaction will complete shortly, adding a strong and growing, female-orientated fascia to complement our global portfolio,” he said.
Russ Mould, investment director at Manchester investment platform, AJ Bell, said: “JD Sports had been on course to join UK retail’s exclusive £1bn profit club but its latest update suggests it might just be left loitering on its fringes.
“The company says profit will be at the lower end of the guided range thanks, in part, to trading volatility around the US election – although just how much uncertainty over the presidential race would affect demand for trainers and sportswear seems open to question.
“It certainly wouldn’t explain why like-for-like sales fell more in the UK than North America, with few British shoppers likely to be hanging their spending decisions on what happened on 5 November. However, the focus on the US shows just how important this part of the world is to JD.”
He added: “Weather is also pointed to as a culprit, and while blaming the weather is never a great look, milder conditions in October would have affected demand for higher ticket items like puffer jackets.
“The company has exercised some discipline – evident in a modest increase in the gross margin – and this decision may pay off in the longer term.
“European sales were also a bright spot and the company should soon complete its acquisition of French franchise Courir, having cleared regulatory hurdles. This will not only boost JD’s footprint on the continent but may also increase its foothold among women given Courir’s skew.”
