JD Sports shares crater after ‘King of Trainers’ warns on profit
JD Sports has slashed its profit target as the growth plan led by chief executive Régis Schultz loses steam, sending its share price into a tailspin.
The sports and fashion retailer saw sales performance improve in the UK, but a slowdown in the US and intense discounting by rivals is dragging on the firm’s profit, it said on Thursday.
The FTSE 100 group downgraded its pre-tax profit target to between £700m and £800m, down from an upper limit of £850m. JD Sports shares fell more than 10 per cent, to 83p, in early trading.
This profit hit comes as Schultz battles to regain the confidence of JD Sports’s investors, who are becoming impatient with the group’s sluggish share price and the lack of firm results from the chief executive’s strategy.
He said that “trading in the second quarter remained tough,” adding that the retailer is facing tougher competition as rivals turn to promotions to woo cash-strapped shoppers.
“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.
US sales nosedive
The group’s like-for-like sales declined by 3.1 per cent in the second quarter – almost double the 1.7 per cent slowdown forecast by Berenberg – and by 2.8 per cent across the six months to August.
JD Sports said a slight improvement in its UK trading – where sales inched up by 0.8 per cent – was due to strong demand for replica football kits and in its outdoor range.
But sales in the US, which accounts for 35 per cent of the group’s sales, slumped by 6.8 per cent. The retailer blamed “weaker core consumer sentiment amidst the broader cost-of-living backdrop”.
The group said the ‘back-to-school’ rush would usually boost its US sales at the end of July, but this falls in the first half of August this year.
Sales jumped by 1.4 per cent in Asia Pacific, though this market accounts for only five per cent of the group’s takings.
Chair quit after boardroom tussle
Explaining the cut to profit targets, JD Sports said that the “period of muted market growth” which it forecast in May has proved to be “more acute than expected,” particularly in America.
The firm is still on track to deliver free cash flow of £460m to £520m despite the cut to profit expectations.
Since joining JD Sports in 2022, Schultz has faced a battle to replicate the covid-era athleisure boom as a cost-of-living squeeze falls heavily on its younger core customer.
In April, group chair Andy Higginson quit after failing to convince board members to oust Schultz. He has since been replaced by former Ikea chief executive Peter Agnefjall.
Thursday morning’s share price spook left JD Sports down more than 10 per cent in the past year. The stock has shed about 30 per cent of its value since Schultz took charge.