Shares in JD Sports plummeted over 12 per cent this morning following a profit warning from the company. The FTSE 100 heavyweight now predicts full-year pre-tax profits to be between £915m and £935m, a significant drop from its previous forecast of £955m to £1.035bn.
This morning, the Bury headquartered retail titan informed markets that sales had dipped by 1.5 per cent across November and December due to a "challenging and volatile market". Despite this, revenue saw a growth of 3.4 per cent during the same period, as reported by .
However, December's revenue increase of 1.5 per cent fell short of the British Retail Consortium’s market average of 3.2 per cent. JD Sports' CEO, Régis Schultz, commented that the company had performed well "considering the current... market".
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He added: "Market headwinds were higher than we anticipated and therefore our full year profit forecast is slightly below our previous guidance," and warned of a cautious approach to the new financial year due to expected continued trading conditions. Mamta Valechha, consumer discretionary analyst at Quilter Cheviot, noted that "while JD Sports has not called out any brand in particular, it is well understood that a significant amount of the company’s woes are related to Nike."
She further explained: "In December, just before the Christmas break, Nike’s reporting saw it push its inflection point out for at least another two quarters, with the coming two quarters being clear out events. "
"The supply of new franchises will be further constrained over the next few seasons, which we would expect to hinder top line momentum for JD Sports too. While Nike’s clearance is on its own digital channel, it has led to an environment where it is capturing and competing with its wholesale partners as opposed to creating and growing demand," Valechha said.
Economic uncertainty has also dented consumer confidence, with many retailers reporting lower footfall and fewer big-ticket sales. According to data from accountancy and business advisory firm BDO, high street sales growth was stagnant at 0.1% in the final quarter of 2024 - a worrying sign for JD, whose stores typically outperform its online channel.
"After a challenging year, this low level of growth is a real concern for the retail sector," said Sophie Michael, head of retail and wholesale at BDO.
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Danni Hewson, head of financial analysis at AJ Bell, noted that "consumers are worried about another round of anticipated price increases, and they’ve already demonstrated restraint."
"The reality of a sluggish economy, impending labour cost increases, rising bond yields, and a volatile pound must all be factored in," Hewson added.
Helen Dickinson, chief executive of the BRC, said the golden quarter "failed to give 2024 the send-off retailers were hoping for" after a tough autumn.
Retailers are bracing for a £2.5 billion hike in their wage bills due to a rise in employers' national insurance contributions (NICs). JD Sports' chairman, Andrew Higginson, had cautioned last autumn that this change would spark "guaranteed inflation" and be "too much for industry to bear".
JD Sports reported flat like-for-like revenue in the year-to-date and anticipates full-year like-for-like revenue to remain at a similar level. The company expects full-year organic revenue growth to be around 5%.