ii view: JD Sports - a play on the US consumer

Fourth-quarter trading for the nine weeks to 3 January

• Like-for-like, or same store sales down 1.8%
• Expects the full-year gross margin to be around 0.5% lower, an improvement from the 0.6% fall seen over the first nine months of this financial year

Guidance:

• Expects annual profit before tax and adjusting items (PBTAI) in 2026 to broadly match City forecasts of around £849 million versus £923 million in 2025
• Anticipates muted broader industry growth for the 2027 financial year ahead

Chief executive Régis Schultz said:

"Overall sales during the peak period were in line with our expectations, against a volatile consumer backdrop.

“Looking ahead, we remain confident that our agile, multi-brand, cross-category approach will enable us to outperform the market, and deliver strong cash flows and enhanced shareholder returns.”

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ii round-up:

Global sports-fashion retailer JD Sports Fashion (LSE:JD.) operates 4,865 stores and a series of websites across 36 countries.

Away from JD Sport itself, other store brands include Finish Line, ShoePalace and Sprinter. Outdoor brands owned in the UK include Blacks, Millets and Go Outdoors.

For a round-up of this latest trading update announced on 21 January, please click here.

ii view:

Started in 1981, JD Sports today employs around 90,000 people. Footwear generated most sales during its last financial year at 60%, followed by apparel at 31%, accessories 6% and outdoor equipment and gym memberships the balance of 3%. 

Geographically, North America accounted for most sales during this latest quarter at 39%, followed by Europe at 32%, the UK 25%, and Asia Pacific the balance of 4%. 

For investors, quarterly sales fell in Europe and the UK, with governments in Germany and France heavily indebted and youth unemployment in the UK recently rising to a five-year high. Promotional activity impacting profit margins continues to be required, with broader industry growth for the year ahead predicted by management to be muted. Group net debt, including lease liabilities, of £3.18 billion as of early August, compares to a stock market value of £3.9 billion, while a forecast dividend yield of 1.3% contrasts with estimated yields of over 4% for fellow retailers Next (LSE:NXT) and Sainsbury (J) (LSE:SBRY).  

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More favourably, management action to improve performance including more focused marketing, a cost savings drive following previous takeovers, and investing in technology to aid online performance are ongoing. Some influence from sporting events has been seen in the past, with the football World Cup being held this summer in its biggest market North America. Brand and geographical diversity persist, while major supplier Nike Inc Class B (NYSE:NKE) has refocused back to selling via the wholesale avenue including retailers such as JD Sport and less on its own direct sales.  

For now, falling same store sales and expected lower annual profits generate caution. That said, ongoing self-help actions, improved US sales, and a consensus analyst fair value estimate above 105p per share will likely continue to attract more speculative investors.

Positives: 

• Diversity of product, brand name and geographical location
• Management actions to improve performance 

Negatives:

• Uncertain economic outlook
• Subject to currency movements

The average rating of stock market analysts:

Strong hold