JD Sports has seen revenue and profit slip so far this year, as weak consumer confidence in its key US market drives a “tough trading environment”.
Régis Schultz, chief executive of the so-called ‘King of Trainers’, said on Wednesday that he is “encouraged” by the progress towards his growth plan while admitting that cost-of-living pressures are “weighing” on its core consumer.
The FTSE 100 group saw like-for-like sales slip by 2.8 per cent in the six months to August, as pre-tax profit dropped by a fifth to £282m.
The retailer’s overall sales were dragged down by a four per cent decrease in North America. This is the group’s biggest market, accounting for 38 per cent of its sales.
JD’s trading in the region had been propped up by the US tax refund season and new product launches at the start of the year, but performance has “softened” in recent months.
Declining sales in North America were put down to “weaker consumer sentiment amidst the broader cost-of-living backdrop and deferred ‘back-to-school’ demand into August,” the group said.
“Footwear performance remained challenged, reflecting softness in end-of-cycle product lines and a promotional market,” the firm told shareholders.
Outdoor products boost JD
But JD pointed to a bounce in sales of outdoor products. Revenue in this range jumped by 4.2 per cent to £743m across the group, compared to a 3.1 per cent dip in sales of branded JD items.
The retailer’s UK sales fell by 1.4 per cent in the period, though the group said its momentum has improved in recent months.
JD saw a three per cent sales boost in the Asia Pacific region, which accounts for five per cent of its market.
Schultz, who earlier this year survived an attempted coup by JD’s then-chairman, has been facing increased pressure from investors to deliver solid evidence that his growth plan is working.
He said on Wednesday that JD Sports is still facing challenges from “cost-of-living pressures” and intense discounting among its rivals.
But he told investors: “By staying close to both our customers and our brand partners, and leveraging our growing own brand capability, we continue to lead with the right products, in the right places and at the right prices.”
The group trimmed its full-year profit target by £50m earlier in the year but said on Wednesday that it remains on track to achieve between £700m and £800m.
Earlier this week, JD Sports announced that it would enter Mexico for the first time, opening more than 140 stores next year through a local franchise operator.
“Mexico is a market with a large, highly engaged consumer base and a demographic profile which aligns strongly with JD’s unique position as a curator of footwear and apparel trends across sport, music and fashion,” the group had said.
Richard Chamberlain, an analyst at RBC Capital Markets, said JD’s earnings met analyst expectations, adding that it is delivering “strong” cash generation amid a “muted” market.
Shares in JD Sports jumped by 1.5 per cent to 79p in early trading.
