Must read weekly preview: JD Sports, UK inflation

A youth with a JD bag in Manchester. Photo by Matt McNulty/Getty Images for Nike.

JD Sports Fashion Q2 trading statement – Thursday 20 August

Richard Hunter, Head of Markets, interactive investor says, “JD Sports Fashion (LSE:JD.) has struggled to make much headway of late, mainly due to factors outside its control. Its strategy remains intact, but the delivery is proving to be a stumbling block.

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Group sales are dominated by footwear (60% of the total) and apparel (30%), whereas by region North America (38%) and Europe (33%) are its largest markets. JD has strengthened its presence in these countries with relatively recent purchases, namely the £900 million acquisition of US retailer Hibbett and a £450 million takeover of French company Courir.

The Hibbett acquisition is aimed to propel brand awareness in the US, especially in the southeastern corner and at the group’s latest update in May like-for-like sales in North America showed some improvement with a decline of 0.6% comparing to a 1.8% drop last year. Group actions to improve performance include more focused marketing, driving cost savings from previous takeovers and investing in technology to aid online performance. It will also be interesting to see the impact on sales from the recent World Cup which largely took place in the US.

More broadly, JD has no direct exposure in the Middle East but second-round effects such as the inflationary impact need to be monitored. Lower-income shoppers could be under pressure due to rising energy costs and any cost-of-living demands on individual budgets, particularly in its core younger market. More positively, Sportswear continues to take share within apparel due to rising participation in athletics, particularly among higher-income consumers who tend to have a greater propensity to spend regardless of the economic backdrop.

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The group has needed to sacrifice some margin with promotional activity of its own to stem the sales decline, although it has upgraded its e-commerce capabilities, improved its global supply chain and automated one of its larger distribution centres.

Investors will be watching for any updates to guidance, where the group is predicting pre-tax profit of between £750 and £850 million this year, a decline on last year’s £852 million. A £200 million share buyback programme offers some support, although the shares have limped to a gain of just 4% over the last year, remaining down by 51% over the last five. Even so, there remains some lingering hope from investors given the green shoots which the acquisitions bring, while the faltering price has left the shares on an extremely lowly valuation in historic terms.”

UK inflation – Wednesday 19 August

Victoria Scholar, Head of Investment, interactive investor says, “It is a busy week for UK economic data ahead with labour market figures next Tuesday and inflation data on Wednesday.

Inflation is expected to jump in July from a 15-month low of 2.6% in the 12 months to June. Next week’s headline CPI is likely to rebound to around 2.9%, fuelled by higher domestic energy bills after the recent 13% jump in Ofgem’s energy price cap. The predicted rise in inflation is more due to a quirk in the mechanism around how the regulator influences energy bills in the UK rather than the Iran war directly. 

Having said that, this year’s geopolitical turmoil in the Middle East and the accompanying rise in wholesale gas prices is why the cap has reset sharply higher. Higher airfares over the busy summer travel season could also add to upward pressure on inflation, offset to some extent by the government’s Great British Summer Savings scheme, which reduces prices on family attractions and kids’ meals by cutting VAT from 20% to 5% until the start of September.

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Looking ahead, inflation is expected to continue to rise, peaking above 3% later this year, as the UK economy continues to grapple with the backdrop of elevated energy prices and the effective gridlock in the Strait of Hormuz. Plus, there is potential for some demand-led inflation amid the resilient UK economy, evidenced by this week’s stronger than expected GDP data for June. The UK is now on track to be the fastest-growing economy in the G7 in the first half of 2026, benefiting from a boost to spending around the World Cup and summer heatwave.

The Bank of England is likely to carry out roughly one 25 basis point hike by the end of the year as it looks to temper the risk of overheating and help push the inflation rate back in the direction of the central bank’s 2% target.”