JD Sports to fall short of £1billion profit target
JD Sports is to miss the ambitious £1billion profit target it set for the year.
In a statement to the stock market this morning the Bury-headquartered global retailer of sports, fashion and outdoor brands, said it would come in between £915m and £935m.
The company blamed “milder weather from the second half of September”, and said overall the retail sales market was “softer and more promotional than we anticipated, reflecting more cautious consumer spending”.
The company also had to increase promotional activity, which impacted margins and has reclassified certain capital expenditures into operating expenses, expected to be worth £7m, lower interest income of £8m following the acquisition of Spanish retailer ISRG NCI, as well as “dual running infrastructure costs”.
The full year ends on 3 February 2024 and new auditors will work with the board to release a full-year trading outcome update in March, including initial guidance for FY25.
Régis Schultz
Régis Schultz, chief executive of JD said: “We have made good progress against our five-year strategic plan, delivering global organic revenue growth of 6% in the period, against very tough comparisons with last year, and opening over 200 new JD stores in the year. Our key markets have seen increased promotional activity during the peak trading season, driven by a more cautious consumer, but we continue to grow market share. We are confident in our strategy and we continue to invest in our supply chain, systems and stores, supported by our strong cash generation and healthy balance sheet.”
The share price has taken an immediate hit.
AJ Bell investment director Russ Mould described the profit warning as “a terrible start to the new year” and said it was a sign of a squeeze on consumer spending on non-essential purchases.
“JD is not alone in having to slash prices to shift stock as consumers continue to battle the impact of high interest rates and simply cannot afford everything they may want. Plenty of other names in the retail sector have recently given similar messages about a slowdown in sales growth and/or the need to run big promotions, including Zara’s owner Inditex, H&M and ASOS.
“JD’s products fall into the discretionary spending category – they are nice to have, but not essential. When times are hard, consumers are going to prioritise their spending in favour of things they really need.
“That might explain why Next has fared better with its latest trading update. We all need to buy coats, jumpers and so on, and Next is better positioned to capture the ‘essentials’ trade. Interestingly, its full-price sales were better than expected in the last nine weeks of 2023, suggesting that some shoppers are happy to pay up for what they perceive to be good quality ‘must have’ items.
“For JD, issuing a profit warning is a terrible start to the new year. It will put pressure on management to up their game and find innovative ways to shift more stock without sacrificing too much margin. Any interest rate cuts from the Bank of England will be a gift to the consumer and therefore to companies like JD, but there is no guarantee that will happen any time soon.”
By 10am JD was the biggest faller on the FTSE 100 index of major shares dropping 33.95 to 121.50 a share, a fall of 21.84%.
