US Sales Slump Forces JD Sports Profit Warning
US Sales Slump Forces JD Sports Profit Warning
The News
JD Sports, the British sneaker and sportswear chain, cut its full-year profit forecast on Thursday after sales in North America — its biggest market — fell 6.8% year-on-year, with the company blaming cost-of-living pressure on its core young shoppers.
Like-for-like sales fell 3.1% globally in the 13 weeks to August 1.
The company's share price dropped by about 14% on Thursday, and Reuters reported the FTSE 100 fell as JD Sports tumbled on the warning.
Timeline
JD Sports' second quarter. Like-for-like sales down 3.1% globally, down 6.8% in North America, up 0.8% in the UK.
During that quarter, England and Scotland played in the group stages of the men's football World Cup, driving what the company called strong replica kit sales in the UK.
JD Sports issues the trading update and downgrades full-year pre-tax profit guidance to between 700 million and 800 million pounds, from a previous range of 750 million to 850 million pounds. Shares fall roughly 14%.
Reactions
Chief executive Regis Schultz said: "Trading in the second quarter remained tough. 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."
On the American shortfall, Schultz said: "North America saw the most acute impact, also reflecting a slower quarter for high-heat footwear product and the timing of back-to-school demand."
He said the UK "delivered a good quarter, with strong football replica kit sales and an improved performance in our outdoor business."
Richard Hunter, head of markets at Interactive Investor, said: "Lower-income shoppers are under pressure due to rising energy costs and any cost-of-living demands on individual budgets, particularly in its core younger market." He added that 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."
What's Next
JD Sports now expects full-year pre-tax profit of 700 million to 800 million pounds, and says the market remains highly promotional — meaning more discounting on footwear.
The company tied part of the American weakness to the timing of back-to-school demand, so the coming weeks of back-to-school and holiday buying are the next test of whether US shoppers come back.
More
JD Sports depends largely on non-essential spending by younger customers chasing the latest styles — the part of the budget that gets cut first when prices bite. The company said pressure on consumer spending hit footwear sales, especially hotly anticipated launches and limited-edition trainers, though demand for running shoes and newer styles partly offset it.
It is not the only retailer flagging a cautious American shopper. Walmart on Thursday reported comparable US sales growth of 2.6% in its second quarter, its lowest in more than six years, according to MarketWatch, and its shares slid. The New York Times reported that Walmart and other big US retailers have warned consumers are being cautious even when their personal balance sheets look healthy.
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