JD Sports to have fresh punt at £1billion profit goal

JD Sports Fashion Plc says its second quarter trading has sown “double digit Organic sales growth” in North America thanks to a store rollout programme which mean it is back on course to deliver £1bn plus of profit.

The business suffered a crisis of confidence at the start of the year when it issued a profit warning that it fall short of its ambitious £1bn target which analysts and investors had been assured.

Régis Schultz

However, in an update for the 13 weeks to 3 August 2024 Régis Schultz, chief executive, said he was on track: “I am pleased to report like-for-like sales growth of 2.4% and organic sales growth of 8.3% in the second quarter, demonstrating the strength and agility of our multi-brand model. In particular, we saw double-digit organic sales growth in North America and Europe, supported by the continued success of our JD store rollout programme.

“We completed the acquisition of Hibbett, Inc. just before the period end and we look forward to its contribution to the growth and development of our US business in the coming years. Based on our first-half trading, we remain on track to deliver profit within our full-year guidance,” he said.

Growth was strongest in North America (+5.7%) and Europe (+3.0%), while the UK improved materially from the previous quarter.

The statement to the stock market this morning said the business has shown “good promotional discipline and managed inventory proactively” to support gross margins in the period, which at 48.4%, down on last year, mostly in the UK.

The acquisition of US sports retail brand Hibbett completed on 25 July 2024, just ahead of the period end. 

Its 1,179 stores are expected to strengthen JD’s hand with brands such as Nike and Adidas. 

During the first half of the year JD opened 85 new JD stores, which along with the Hibbett acquisition and the ongoing disposal of non-core stores, meant the Bury-headquartered business ended the first half with 4,506 stores, up 1,189 from the start of the year.  

The update ended with a commitment to the pre-tax profit goal of £1,035bn.

“The global macro environment remains volatile and so we continue to be cautious on our outlook for the rest of the year. Notwithstanding this, based on our first half trading and allowing for an anticipated c.£15m headwind at current exchange rates due to a stronger pound, we are maintaining our guidance range of profit before tax and adjusting items of £955m to £1,035m, on a pre-Hibbett basis,” the company said.

Dan Coatsworth, investment analyst at Manchester investment platform, AJ Bell, said: “There was a sense of nervousness in the air in the run-up to JD Sports’ update.

“Cracks have appeared in the athleisure market this year and several big names in the industry have found life harder, including Nike and Lululemon.

“Consumers realised they either don’t need, or they cannot afford the latest trainers and tracksuits. Fashions also evolved.

“However, there was a glimmer of hope when Adidas upgraded its earnings guidance in July, implying that the sector might still be match fit.”

He added: “JD Sports’ latest trading update will be a big relief to investors. It is still growing sales and there was only a small dip in margins, which might surprise given how many retailers have resorted to discounting to shift goods.

“The recent acquisition of Hibbett means JD is increasingly reliant on the US for sales. JD will be hoping the country avoids recession, otherwise the acquisition could look ill-timed.

“It would be embarrassing if sales fall short of expectations after spending $1bn on the deal.”