JD Sports says cost-of-living squeeze hitting sales despite football kit boost

JD Sports’ latest trading update was “another setback”, AJ Bell head of markets Dan Coatsworth has said.

The retailer is downgrading its profit outlook following a 3.1 per cent decline in sales over the 13 weeks to August 1.

Coatsworth said: “The trading update amounts to yet another setback for JD.

“There is only so long that shareholders will stay patient, and time is running out for chief executive Regis Schultz to whip the company back into shape.

“JD’s share price has fallen by 27 per cent since he began as CEO in September 2022 versus a 50 per cent rise in the UK’s FTSE 100 index. That’s a significant level of underperformance.

“The Rubin family-owned Pentland Group is the majority shareholder in JD, and one can imagine it is frustrated at the retailer’s progress.

“However, a lot of the problems facing JD are not of its own making, so Pentland might want to choose constructive discussions on strategy rather than simply calling for leadership change.”

Sales in North America, its biggest market, fell 6.8 per cent year-on-year.

Coatsworth added: “JD Sports picked the wrong time to go big in America.

“The acquisitions of Finish Line, Shoe Palace and DTLR between 2018 and 2021 were designed to supercharge its footprint in the US, and the group now derives 40 per cent of its sales from the region.

“Unfortunately, this positioned JD in the crossfire of Trump’s punishing tariffs which pushed up the cost of the multitude of shoes made in Asia.

“A more cautious consumer has also weighed on sales, and the trend for people rushing to buy high-end footwear has lost momentum. Limited edition trainers used to be all the rage, but demand has now slowed.

“The obvious response in these situations is to slash prices and accept a lower profit margin. JD talks about price investments in its trading update which is corporate speak for discounting.

“If the broader retail market is running money-off promotions, then JD would run the risk of losing out on sales if it didn’t also run deals and stay competitive on pricing.”

Coatsworth said: “JD’s UK performance was more resilient, helped by a trend for replica football shirts. Fundamentally, Asia Pacific was the only real bright spot for the group.”