JD Sports expects profit to be at lower end of guidance

JD Sports Fashion PLC warned on Thursday that its annual profit is likely to land at the lower end of its previously issued guidance, following weaker-than-expected third-quarter sales.

JD Sports expects profit to be at lower end of guidance

Shares of the Manchester-based sportswear retailer dropped sharply in early trading, down 12% to 99.34 pence in London, marking a 31% decline over the past year. The company cited a "volatile" October as a significant factor, which offset a promising start to the quarter. JD Sports now anticipates adjusted pretax profit to come in at the lower end of its £955 million to £1.04 billion range. While this still represents at least a 4.1% increase from the £917.2 million achieved in the 53 weeks to February 3, it reflects a more cautious outlook. The October slowdown was evident in like-for-like (LFL) sales, which fell 0.3% in the third quarter. Year-to-date LFL sales growth now stands at 0.5%. The company attributed the dip to "unseasonable weather and a cautious consumer" during the 13 weeks to November 2, as well as "suppressed demand in the U.S. ahead of the election."

Sales breakdown

By region, third-quarter LFL sales declined 2.4% in the UK, 1.5% in the U.S., and 3.8% in Asia-Pacific. Europe was a bright spot, with LFL sales up 3.5% year-on-year. Globally, physical stores outperformed online channels, and footwear continued to outperform apparel in terms of LFL sales. On an organic basis, third-quarter sales rose 5.4%, with Europe again leading the way at a 10% increase. Organic sales in North America grew by 5.9%, and Asia-Pacific saw a 5.0% rise. UK organic sales were flat, down 0.1%. Year-to-date organic sales growth across the company stands at 6.1%. JD Sports said it opened 79 new stores during the period, which contributed to organic sales growth. It also reported "good progress" on its acquisition of French sneaker retailer Courir, having met all regulatory conditions and expecting to finalize the deal soon, though no further timeline details were provided. The U.S. subsidiary Hibbett Inc is still expected to contribute around £25 million to pretax profit, though currency exchange rates are expected to reduce pretax profit by £15 million. JD Sports completed its $1.08 billion acquisition of the Birmingham, Alabama-based retailer in July.