A JD store in Germany
JD Sports reassured the market it would meet 2024 guidance and introduced an upbeat forecast for 2025 / Image source: Adobe
  • Full year 2024 profits to meet downgraded guidance
  • Sporting summer to boost sales
  • £1 billion pre-tax profit milestone in sight

Retailer JD Sports Fashion (JD.) has a spring in its step again, having damaged its hard-earned credibility with a surprise January profit warning pinned on a softer and more promotional Christmas trading season.

Shares in the trainers, tracksuits and running tops seller rallied 7% to 129p in early dealings as JD Sports reassured the market it would meet recently downgraded full year 2024 earnings guidance and introduced a rather upbeat forecast for full year 2025.

This came as a relief to investors since key athleisure and footwear players Lululemon (LULU:NASDAQ) and Nike (NKE:NYSE) both disappointed with their latest updates as consumers rein in spending and competition heats up.

ON A FIRMER FOOTING

In a reassuring trading update JD Sports, which retails premium brands including Nike, Adidas (ADS:ETR) and The North Face, said pre-tax profit for the 53 weeks to 3 February 2024 will be in line with the £915 million to £935 million guidance given after Christmas.

Total sales grew 3.6% to £10.5 billion last year, while like-for-like sales grew 4.2% but with a weakening trend in the fourth quarter, where JD Sports eked out same-store growth of just 0.1%.

This slowdown demonstrates the retailer isn’t immune to the wider issues that are causing similar pressures for Nike and JD Sport’s US retail peer Foot Locker (FL:NYSE).

In the fourth quarter, the UK & Republic of Ireland region was the weakest as JD Sports chose not to fully participate in the significant promotional activity within the UK.

But all other regions - Europe, Asia Pacific, North America - saw organic growth in the high single digit to low teens range.

WHAT DID REGIS SAY?

CEO Regis Schultz reminded investors that his charge outperformed the sportswear market last year ‘reflecting the strength of our business. We achieved like-for-like sales growth of over 4%, organic growth of over 8% and our athleisure fascias achieved organic growth of over 10%.’

Schultz conceded the current trading environment remains challenging ‘due to less product innovation and elevated promotional activity, especially online’, but JD Sports ‘anticipates trading conditions will improve as we move through the year, helped by a busy sporting summer and softer comparatives with last year.’

Flush with over £1 billion of year-end net cash in the coffers, JD Sports said trading in the first seven weeks of the new financial year was in-line with expectations.

Confident it can outperform the market again this year with a boost from new store openings, the retailer guided for full year 2025 pre-tax profits in the £955 million to £1.035 billion range.

JD Sports Fashion shares fall 20% after profit warning


EXPERT VIEWS

Begbies Traynor’s (BEG:AIM) Julie Palmer commented: ‘With inflation helpfully coming down from the peaks experienced last year, and the Bank of England looking increasingly likely to start cutting interest rates, the retail giant should start to feel less pressure on its margins and find a firmer footing in the near future.’

Palmer added: ‘Investors should feel some reassurance that performance hasn’t deteriorated further since its January profit warning, though they will by no means expect trading to make a quick recovery, given Nike’s weak performance will likely have a knock-on effect for JD.

‘Unfortunately, JD Sports’ profit target of £1 billion doesn’t appear attainable just yet. For now, the retailer’s focus should be on navigating the current headwinds and eventually rebuilding its margins, which shouldn’t be too difficult for a company with an impressively strong brand and reach.’

Quilter Cheviot analyst Mamta Valechha commented: ‘JD Sports echoed Nike’s view on future performance, with the expectation that full year 2025 will be second half weighted, with Q1 being the weakest.

‘Trading conditions are expected to improve as we move through the year, propped up by a busy sporting summer, softer comparatives with last year from the second quarter and an improving product pipeline towards the end of the year.’

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Issue Date: 28 Mar 2024