JD Sports has cut its profit forecast and reported sluggish sales growth, as the expansion strategy spearheaded by chief executive Régis Shultz begins to falter. The FTSE 100 giant scaled back its pre-tax profit target to between £700m and £800m, retreating from a previous upper limit of £850m.
US sales decline and competitive pressures
The sports and fashion retailer saw its sales performance pick up in the UK, but a deterioration in the US market coupled with aggressive discounting from competitors is weighing heavily on the firm's bottom line, it said on Thursday. Revenues in the US, which represents 35 per cent of the group's total sales, tumbled by 6.8 per cent.
Shultz acknowledged that "trading in the second quarter remained tough," adding that the retailer is contending with heightened competition as rivals resort to promotional activity to attract hard-pressed consumers, as reported by City AM. "The market stayed highly promotional, reflecting the consumer and footwear product cycle headwinds our industry has faced in recent quarters, whilst our core consumer was impacted by incremental cost-of-living pressures," he said.
Like-for-like sales performance and UK recovery
The group's like-for-like sales fell by 3.1 per cent in the second quarter – nearly double the 1.7 per cent decline projected by Berenberg – and by 2.8 per cent across the six months to August. JD Sports attributed a modest recovery in its UK trading – where sales edged up by 0.8 per cent – to robust demand for replica football kits and its outdoor range.
Sales rose by 1.4 per cent across Asia Pacific, although this market accounts for just five per cent of the group's overall revenues. The retailer attributed the decline in the US to "weaker core consumer sentiment amidst the broader cost-of-living backdrop."
Profit forecast revision and investor pressure
Accounting for the reduction in profit targets, JD Sports stated that the "period of muted market growth" it had anticipated in May has turned out to be "more acute than expected," particularly across the Atlantic. The business remains on course to deliver free cash flow of £460m to £520m despite the downward revision to profit forecasts.
The profit setback arrives as Shultz struggles to restore the faith of JD Sports's shareholders, who are growing increasingly restless over the group's lacklustre share price and the absence of tangible results from the chief executive's strategic vision. Since taking the helm at JD Sports in 2022, Shultz has struggled to recreate the covid-era athleisure surge as the cost-of-living crisis weighs heavily on its predominantly younger customer base.
Leadership changes and share price impact
In April, group chair Andy Higginson stepped down after failing to persuade board members to remove Shultz from his position. He has since been succeeded by former Ikea chief executive Peter Agnefjall. Shares in JD Sports have climbed nine per cent so far this year, yet remain approximately 15 per cent below the level at which they stood when Shultz assumed control.
