JD Sports shares slump as Q1 sales fall amid 'volatile' market

Shares in JD Sports Fashion fell sharply on Friday despite the company holding annual guidance amid a "volatile" market as it said group current-year first-quarter like-for-like sales were down 0.7% and 6.4% in the UK.

Unaudited profits before tax and adjusting items for the 53 weeks to February 3 of £917.2m were down 7.5%, against forecasts of £920m after. JD Sports shares were down almost 9% in early London trade.

The company held full-year profit before tax and adjusting items guidance of £955m-£1.035bn. It issued a profit warning in January, as consumers were more cautious with their spending and major suppliers such as US giant Nike lowered sales outlooks.

Revenues increased 2.7% to £10.4bn, boosted by the opening of more than 200 shops, and plans to open a further 200 over the current financial year.

However, this was partly offset by disposals, after the company sold off five brands – Tessuti, Scotts, Choice, Giulio and Cricket – to rival Frasers Group. Organic sales grew by 9%, with like-for-like growth of 3.8% for the year.

"We have started the new financial year with Q1 in line with our expectations in a volatile market and we are on track to deliver our profit guidance for the full year," said chief executive Régis Schultz.

Last month, JD agreed to buy American athletic fashion retailer Hibbett for about $1.08bn.

Guy Lawson-Johns, equity analyst at Hargreaves Lansdown said hitting this year's earnings forecast "will be a tall order if challenging markets prevail", but said the store rollout program was a proactive move.

"Since joining in 2022, CEO Régis Schultz hasn’t shied away from ambitious expansion plans in North America and Europe. With 200 new stores opened last year and another 200 planned this year, Schultz is clearly focused on growth<" he said.

"With growth seemingly not coming quickly enough, the latest billion-dollar Hibbett deal will see the British footwear retailer accelerate its North American growth plans. Adding over 1,000 stores in a key growth market is an attractive proposition, and while the focus on acquisitions may leave little room to increase the dividend, gearing up for future growth could be the best use of capital."

"The opportunity in the US is hard to ignore, with four times the sportswear sales of European markets combined last year. However, weaker outlooks from brands like Nike and Puma illustrate the continued demand challenges being faced."

Reporting by Frank Prenesti for Sharecast.com