JD Sports, a prominent sports fashion retailer, has revised its full-year profit forecast downward by $50 million, now expecting pre-tax profits to be between $700 million and $800 million for the fiscal year ending January 2027. This reduction from the previously anticipated range of $750 million to $850 million comes as the company grapples with persistent cost-of-living pressures, which have notably impacted consumer spending, especially among its younger demographic.
The primary driver of this profit warning is a substantial slowdown in sales within the US market, which accounts for 35% of JD Sports' overall sales. Like-for-like sales in North America plunged by 6.8% in the second quarter, and organic sales fell by 4.5%. This decline was attributed to weaker core consumer sentiment, a slower cycle for limited release footwear, and the deferral of some back-to-school shopping into August. The company also noted increased competitive discounting, which further pressured sales and margins.
Despite the struggles in the US, JD Sports saw some regional variations. Sales in the UK, for instance, inched up by 0.8%, partially bolstered by strong demand for replica football kits and outdoor ranges. Asia Pacific also showed growth, with sales jumping 1.4%. However, these gains were not enough to offset the significant declines elsewhere, particularly in Europe where like-for-like sales fell 3.3%, and the overall group saw a 3.1% decline in like-for-like sales for the quarter.
JD Sports' share price reacted negatively to the news, dropping by 14% on the London Stock Exchange, reaching its lowest point since May. CEO Régis Schultz acknowledged that trading in the second quarter remained challenging, and the period of muted market growth proved to be "more acute than expected," particularly in the US. Despite the profit forecast cut, the company maintains its free cash flow guidance at $460 million to $520 million, aiming to reassure investors that the issue is primarily a demand problem rather than a cash problem.
