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UK sportswear retailer JD Sports has warned that annual profits will fall short of expectations as consumers cut spending, driving down shares in the FTSE 100 group by more than 20 per cent.
The retailer said in a trading update on Thursday that high levels of “promotional activity” last quarter had eroded margins and that a milder autumn had also hit sales.
The group, which has expanded aggressively into the US in recent years and has about 3,400 stores in more than 30 countries, had shrugged off the challenges facing consumers in some of its major markets.
As a result of the weaker trading in the 22 weeks to the end of December, JD Sports said it now expected pre-tax adjusted profits of £915mn-£935mn for the 12 months to February 3, down from a previous forecast of £1.04bn.
Chief executive Régis Schultz, who succeeded the group’s longstanding head Peter Cowgill in late 2022, said: “Our key markets have seen increased promotional activity during the peak trading season, driven by a more cautious consumer, but we continue to grow market share.”
The rare warning from JD Sports comes weeks after Nike, the world’s largest sportswear manufacturer, announced plans to cut $2bn in costs over the next three years due to softening consumer demand, particularly in China and Europe.
“The consumer is cautious and looking for a deal, and with no especially exciting launches, it has been a dullish period,” said analysts at Peel Hunt.
The group’s organic revenue in the 22 weeks to the end of last year rose 6 per cent, with like-for-like growth of 1.8 per cent, lagging JD Sports’ own expectations.
The retailer did not break down the performance by region, but analysts at Investec believe the biggest squeeze on profits will probably have come from the UK and the US.
Shares in the FTSE 100 group fell more than 20 per cent on Thursday.
In February, Schultz said he would invest up to £3bn to open as many as 1,750 stores worldwide over the next five years. On Thursday he said the company made “good progress against our five-year strategic plan” and opened more than 200 new stores in the year.
Richard Chamberlain at RBC Capital Markets was bullish about its long-term prospects. “We think that JD Sports should maintain its position as a preferred partner of major sportswear brands like Nike and Adidas,” he said.