Home Money JD Sports out of race for £1bn profit after another downgrade

JD Sports out of race for £1bn profit after another downgrade

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JD Sports has cut its profit forecast for the second time in less than two months
  • Next looks set to become first to hit profit milestone as JD Sports downgrades its rating

JD Sports has cut its annual profit forecast for the second time in less than two months after facing tougher-than-expected market conditions during the crucial Christmas trading period.

The Bury-based group, which made £917.2m in the previous year, had hoped to follow retail peers Tesco, M&S and Kingfisher in achieving £1bn in pre-tax profits, but is now set to Next I got over it.

Chief Régis Schultz told investors on Tuesday that “market headwinds were greater” than expected during the nine weeks to January 4.

JD Sports’ decision to avoid discounts also put the group at a disadvantage in “a more promotional environment in the period than we anticipated,” he said.

Like-for-like revenue in November and December fell 1.5 percent as growth in Europe and Asia Pacific only partially offset weakness in trade in the UK and North America.

Recently released industry data suggests a disappointing “golden quarter” for retailers overall, with non-food sales performing particularly poorly.

JD Sports has cut its profit forecast for the second time in less than two months

JD Sports said it had had a “strong Christmas and December”, with like-for-like sales up 1.5 per cent thanks to strong demand from its footwear, sporting goods and outdoor segments.

It also highlighted the market-beating performance of its newly acquired businesses in North America, Hibbett and Courir.

The company has adopted an inorganic expansion strategy, buying brands and expanding into new markets.

Analysts say that while this approach is risky at a time of weaker consumer sentiment, JD Sports should be well positioned when the economy improves.

JD Sports also noted that gross margins were up from last year at 48 percent.

However, the group said it expects to report full-year profits before tax and adjustment items of £915m to £935m, below revised November guidance of £955m to just over £1bn. .

CEO Schultz said: “While I am generally pleased with our performance, market headwinds were greater than we anticipated and therefore our full-year earnings forecast is slightly below our previous guidance. “.

“With these trading conditions expected to continue, we are taking a cautious view of the new financial year.”

JD Sports Fashion Stock fell 9.9 per cent at the open to 86.82p at the open, having lost almost 25 per cent in the last 12 months.

Analysts at Peel Hunt reiterated their ‘buy’ rating on JD Sports but cut their price target on the group’s shares from 250p to 200p.

They said: ‘Sales are not a pretty sight, but we continue to believe that management is taking the right approach by not getting involved in the race to the bottom through discounts.

‘While it’s not impossible that release velocity could slow marginally until Nike fires back up, ultimately JD is becoming a strong market leader in a highly attractive global market, in our view.

‘We believe this is still by far the best brand in sportswear retail and relationships with suppliers remain very strong. Tough trading periods like this come and go, and the strong ones tend to get stronger.

“That’s what we’re predicting here, and while the stock won’t enjoy any downgrades, we think it will almost certainly present a good entry point.”

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