- Improving North America trend
- Full-year profit guidance maintained
- Fresh £100 million buyback
Trainers-to-tracksuits seller JD Sports Fashion (JD.) delivered a soft second-quarter sales performance amid tough athleisure market conditions, with UK like-for-likes remaining weak.
So why were shares in the FTSE 100 retailer marked up 3.5% to 97.2p in early dealings?
Well, investors welcomed modest improvements in JD Sports’ North America and Asia Pacific like-for-like sales and there was relief as the cash-generative retailer stuck with its full-year profit guidance.
Furthermore, the launch of a new £100 million share buyback showed confidence in the group’s cash generation and scope for continued market share gains.
LIKE-FOR-LIKE STRUGGLES
While total revenue grew 2.2% to £3.1 billion in the quarter ended 2 August thanks to new store openings, like-for-like sales continued to decline in Europe and the UK as JD Sports lapped last year’s tough, Euro 2024-inflated comparatives.
Encouragingly, however, the 2.3% drop in North America like-for-likes marked an improvement on the 5.5% decline witnessed in the first quarter, with this resilient showing led by the JD and DTLR fascias.
And while footwear sales were softer in the quarter, JD Sports called out a ‘good performance’ in apparel and insisted its inventory levels continue to be ‘managed effectively’.
GUIDANCE MAINTAINED
JD Sports expects adjusted pre-tax profits for the year to January 2026 will be in-line with consensus at roughly £885 million.
That has come down from £920 million at the time of April’s full-year trading update and is some distance from the £1 billion milestone the retailer was chasing down not long ago.
Management continues to assess potential impacts from US tariffs and is cautious in terms of the outlook given the strains on consumer finances, unemployment risk, and the ‘ongoing shift in the footwear product cycle’.
As chief executive Regis Schultz explained: ‘Across our regions and fascias, in general we see a resilient consumer, albeit very selective on their purchases. We therefore remain cautious on the trading environment going into H2.’
WALKING A TIGHTROPE
Julie Palmer at Begbies Traynor (BEG:AIM) said management will ‘want to focus on the positives - JD continues to grow market share, expand its international presence and maintain strong appeal among younger consumers. Yet its share price is still well below its 2021 highs, suggesting it still needs more buy in for its turnaround plan.’
Russ Mould, investment director at AJ Bell, said the figures were ‘good enough to lift JD out of the danger zone, helped by saying full-year profit will hit market forecasts. Certain investors might have been expecting the worst so a “steady-as-she-goes” update is considered a win.’
Mould continued: ‘Crucial to JD’s share price performance going forward is the company’s ability to navigate the new tariff regime given the US is now one of its biggest sales regions. There is also the fact JD has adopted a cautious tone, noting that consumers are being picky with how and where they spend money. It’s clear JD is walking a tightrope and it wouldn’t take much to knock it off course.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Ian Conway) own shares in AJ Bell.
