JD Sports value plummets after profit warning by £1.8bn

JD Sports has lost more than £1.8bn in value after issuing a profit warning. The fashion retailer cited the mild weather conditions and heavy discounts as the reasons for the decline.

The shares of the retail group, Go Outdoors, Blacks, Millets and Size, have fallen by 23%. Shares in the retail group, which owns Go Outdoors, Blacks, Millets and Size, have fallen by 23% since the company announced that it does not expect to earn more than £935m per year, a 10% decrease from its previous guidance.

It was the biggest loser in the FTSE 100 Thursday, with the price dropping to below 120p a piece – its lowest level in a whole year.

Frasers Group, the owner of Sports Direct, also saw its share price plummet by more than 3% on concerns that the sportswear industry was tougher than expected after Nike warned about poor sales just before Christmas. Other clothing retailers, such as Marks & Spencer, N Brown Group and others, were also hit.

Peel Hunt analysts said that sales and profits had fallen short of expectations in all JD’s regions and that the UK had seen a decline in underlying sales, as a “late surge” that was expected “didn’t really happen”.

Jonathan Pritchard is a retail analyst with Peel Hunt. He said that external factors were primarily to blame. Consumers are cautious and searching for deals, and there have been no particularly exciting [sports-fashion product] launches.

Nike announced last month that sales would likely rise only by 1% for the entire year, which was a much more pessimistic forecast than its previous mid-single digit percentage growth. The world’s most popular sportswear brand announced it would be cutting jobs and simplifying its product ranges in order to focus on newer releases, which have proven more profitable than older favourites.

Adidas reported falling sales for November, as it struggles with the fallout of its partnership, once very successful, with rapper Kanye West (also known as Ye), which terminated when he made racist comments on social media.

Alice Price, an expert at the market research firm GlobalData said that sportswear in general is experiencing a slowdown. She also noted that JD’s focus on fashion, rather than on technical items, has made it more susceptible to consumers cutting back on discretionary purchases.

In the last two years, the rate of inflation has been high, especially in sports footwear. This has led some to reconsider buying the latest versions of trendy trainers.

Price said that JD’s position in the middle market and its core brands such as Nike were also under pressure, as shoppers moved either towards premium specialist brands such as Lululemon Alo Yoga Tala (some of which sell directly online) or high-street own-labels like M&S Goodmove. “They are struggling because people are trading down or up.”

JD’s profit warning has raised concerns about a difficult Christmas for fashion retailers. The mild weather had meant that many people held back on buying expensive coats and sweaters – items which help to deliver high profits in final quarter of the calendar year.

Simon Wolfson, the head of fashion and homeware retailer Next, who reported higher than expected sales, said: “It did not feel to us that there was an enormous amount of more discounting.” JD, however, said there had actually been more than expected, suggesting different parts of market were particularly vulnerable to intense competition.

Regis Schultz is the chief executive officer of the JD Sports Fashion Group. He said that “Our key markets saw increased promotional activity in the peak trading period, due to a more cautious customer, but we are continuing to grow our market share.” We are confident about our strategy, and continue to invest in supply chains, systems, and stores. Our strong cash flow and healthy balance sheets support this.