14 January 2025
If you are covering JD Sports' latest trading update, please see the following comment from Mamta Valechha, consumer discretionary analyst at Quilter Cheviot:
“JD Sports appears to be suffering at the hands of what is a very difficult retail market, posting a soft set of results for the nine weeks to 4 January. The company saw like for like sales down 1.5% in November and December, despite last year’s already weak comparison.
“When broken down further, the key December period was positive with 1.5% sales growth, but was dampened by poor performance in November which led to the overall decline. By region, Europe and Asia partially offset weaker trading in the UK and North America. As a result, JD Sports has lowered its like for like guidance to flat for the coming year, down from the 1-4% it previously anticipated.
“JD Sports cited the market being more promotional than it had anticipated, which the company had opted not to fully participate in. These actions have protected gross margins, which it expects to be in line with last year at 48%. However, the weaker sales mean the group has still downgraded its full year profit guidance by around 7% at the midpoint, with the top end of the new guidance still coming in below the lower end of the prior.
“While JD Sports has not called out any brand in particular, it is well understood that a significant amount of the company’s woes are related to Nike. In December, just before the Christmas break, Nike’s reporting saw it push its inflection point out for at least another two quarters, with the coming two quarters being clear out events. The supply of new franchises will be further constrained over the next few seasons, which we would expect to hinder top line momentum for JD Sports too. While Nike’s clearance is on its own digital channel, it has led to an environment where it is capturing and competing with its wholesale partners as opposed to creating and growing demand.
“With this in mind, visibility is low for JD Sports. However, its shares are currently cheap at 6.7x and, at 96p, it is now even cheaper than during the pandemic.”
