Shore Capital puts JD Sports under review after profit warning

Shore Capital has placed its 'buy' rating on JD Sports Fashion under review after the high street retailer warned on sales and gross margins on Thursday.

As a result of milder autumn weather and heavier discounting over the peak holiday shopping season, full-year gross margins are expected to be slightly lower than last year, leading the company to lower its adjusted pre-tax profit guidance for the 12 months to 3 February to £915-935m, from £1.04bn at the half-year stage.

Constant currency organic revenue growth was just 6% in the 22 weeks to 30 December, down from 12% in the first half. For the full year, organic revenue growth is expected to come in at 8%.

"At the midpoint, this marks a notable 15% cut to our FY24 forecast on a stock where the market was not showing strong confidence in consensus expectations (11% cut to consensus)," Shore Capital said in a research note.

"The group speak to ‘good progress’ against its five-year strategic plan, but the market has taken its toll on the share price with this news," the broker said, with the stock down 23% in afternoon trade at 119.35p.

"We see a lot to like in JD, not least its balance sheet, but confidence in earnings estimates is a pre-condition of a positive equity case," the broker said.