JD Sports Fashion has sent shockwaves through the retail sector by significantly downgrading its full-year profit forecast, citing a dramatic slowdown in trading across its crucial North American market.
The sportswear retailer now anticipates pre-tax profits for the year to be between £915 million and £935 million, a substantial reduction from previous guidance. This marks the second profit warning from the company in just six months.
Perfect Storm in North America
The group identified a "more challenging and promotional market" in North America as the primary driver behind the disappointing outlook. This key region, which accounts for nearly half of JD Sports' global revenue, has been hit by a combination of factors.
Unseasonably mild autumn and winter weather across much of the continent has dampened demand for seasonal footwear and apparel. Furthermore, increased competition and a more cautious consumer spending environment have created what the company describes as a "softer market."
Impact on Major Brands
The trading difficulties have particularly affected JD Sports' relationships with cornerstone brands like Nike and Adidas. The retailer noted that sales of these premium brands have underperformed expectations.
This announcement comes at a sensitive time for the sector, with competitor Foot Locker also recently reporting weaker-than-expected results, suggesting broader challenges within the athletic footwear market.
Market Reaction and Future Outlook
The profit warning triggered an immediate sell-off, with JD Sports' share price plummeting by over 20% in early trading. This wiped approximately £1 billion from the company's market valuation, reflecting investor concerns about the sustainability of its growth trajectory.
Despite the short-term challenges, JD Sports maintains that its long-term strategy remains sound. The company continues to expand its global footprint and enhance its omnichannel offering, betting on a recovery in consumer confidence as economic conditions stabilise.
