JD Sports blames profit warning on mild weather

JD SPORTS’ shares plunged almost a quarter after it slashed its profit forecasts, blaming a mild autumn and weaker Christmas spending.

In an unscheduled trading update, the sportswear retailer said shoppers were “more cautious” over the crucial festive period, meaning it now expected profits of between £915m and £935m for the year to Feb 3.

It previously said it was on track to hit £1.04bn in profit before tax and adjusted items.

The news wiped more than £1.7bn from the company’s value as its share price plunged 23pc, ending a rally that had resulted in it gaining almost 40pc since November.

The retailer’s update also dragged down rival Frasers Group, while shares in Adidas were 4.2pc lower yesterday and Puma fell 4.3pc. JD Sports, which makes most of its sales outside the UK, said revenues were up 6pc in the 22 weeks to Dec 30 on a constant currency organic basis and up 1.8pc on a like-for-like basis. This was slightly behind its expectations.

It said this included a hit from milder weather from the second half of September, which weighed on demand for its clothes, and a “softer and more promotional” festive period.

Régis Schultz, JD Sports’ chief executive, said consumers had been more cautious in the run-up to Christmas, signalling a shift from last year when he said the company’s shoppers were more resilient than those at rival retailers. He said last May that its younger customer base was able to keep spending even as cost of living pressures forced others to cut back, because they were still living at home with parents and “don’t have to pay the rent, mortgage or the utilities”.

Kate Calvert, an analyst at Investec, said the change in mood among its shoppers was unlikely to have been driven by them having less to spend.

She said: “They will still spend but they need something exciting and interesting, and the innovation hasn’t been there on the athleisure side.

“You look at what’s out there and it’s all a bit samey.”

Ms Calvert said JD Sports’s update suggested that many of the sportswear brands had pushed their prices too high, spurring shoppers to look for discounts.

Analysts at Peel Hunt said retailers were having to put promotions on not just older stock but also newer ranges to tempt customers.

They said Christmas falling on a Monday also meant that “many shoppers left it late but when they did make their purchases, it was often from the sale”.

Separate figures released by the British Retail Consortium today reveal that retail footfall was down 5pc in December on a year-on-year basis, with shopping centres particularly struggling.

Andy Sumpter, from Sensormatic Solutions, said there were some glimmers of higher shopper traffic, but “many may have been waiting for a last-minute Christmas trading rush that never came”.

He said: “There’s little doubt that the overall downward year-on-year trajectory in store visits in December – usually the crescendo of the golden quarter – will have come as a blow.”

Peel Hunt said it expected other retailers to have been hit by the same gloomy environment as JD Sports, which is among the earliest to report Christmas trading.

Barclays analysts added that pressure to discount stock appeared to show this was a cyclical issue rather than a structural one for JD Sports.

However, there have been signs of wider pressure within the sportswear market. JD Sports’ downgrade comes weeks after Nike, one of the biggest brands stocked in its stores, was forced to cut forecasts amid softer demand in Europe and China.

Late last month, Nike unveiled plans for a sweeping restructuring plan after it warned that shoppers were only spending during major events, such as Black Friday, and not at other times.

‘They will still spend but they need something exciting ... the innovation hasn’t been there’