JD Sports has forecast a decline in profits for the current fiscal year, citing a "muted market" impacted by concerns over the Middle East conflict and reduced spending among young people facing rising unemployment. The sports fashion retailer, which operates 4,800 stores worldwide including JD, Blacks, and Millets in the UK, anticipates profits between £750 million and £850 million for the year ahead, down from £852 million reported in the year ending January.
Youth Market Under Pressure
Régis Schultz, the retail group's chief executive, highlighted that the core youth market has been hit by rising unemployment. He noted that part-time contracts of 10 to 30 hours per week enable young people to purchase sneakers, but this spending power is diminishing. Industry data indicates that sales to 14-18 year olds have dropped by over 10% across Europe, including the UK.
Impact of Iran Conflict
JD stated that there has been "no material business impact to date" from the war in Iran, but warned that the conflict could eventually push up costs and prices. The company said: "Over time, the potential future impacts of heightened uncertainty may contribute to direct cost pressures, including energy and fuel costs across our store and logistics networks, respectively, as well as potential indirect impacts on pricing and consumer demand should input cost inflation emerge." However, Schultz ruled out immediate price increases, stating, "We don't believe the market and the consumer is ready for price increases. There is not enough heat in the market."
Sales Performance
JD does not expect an increase in sales this year, excluding acquisitions, after recording flat sales in the three months to April. This followed a 2.1% sales increase in the year to January, reaching £12.66 billion. The UK was the worst-performing market, with sales down 2.5%, offset by growth in other European markets and the US. Cold and wet weather since the end of the financial year has dampened sales, and April trading was "volatile," with a strong Easter followed by fewer store visitors.
Brand Partnerships and Innovation
Schultz admitted that brands like Nike need to innovate to attract shoppers, as the shift from formal to sports footwear has slowed. JD aims to leverage automation and AI to improve supply chain efficiency and product selection. The company also plans to continue shifting toward fewer, larger stores in the UK, where it closed 24 outlets in the past year but increased selling space by 4%.
Shares in JD, which partners with boxer Anthony Joshua and YouTuber Chunkz, rose nearly 10% on Thursday, making them the biggest gainer on the FTSE 100.
