JD Sports reassures investors over full-year targets

The boss of JD Sports has shrugged off the problems facing Nike, its biggest supplier, and credited the range it offers in store for offsetting weaknesses with individual brands.
Regis Schultz, chief executive, said the retailer was on track to meet its annual profit target of between £955 billion to £1.04 billion, despite a slowdown in demand for Nike products and operating in what it called a competitive and promotional marketplace.
The self-proclaimed “King of trainers” posted “record” first-half results, which demonstrated robust demand for its tracksuits and trainers, but its shares fell 9p, or 6 per cent, to 140¼p as investors fretted over Nike’s poor results.
Nike posted the biggest drop in quarterly sales since the pandemic on Tuesday night, sparking concern from Investec analysts that its “weak innovation and promotional activity” could hurt JD Sports.
Schultz told reporters on Wednesday that he was not concerned about weaker demand for Nike products as JD Sports’ own business model was “agile — we know to manage this multi-brand play. This is what we do for a living”.
JD Sports stocks other popular brands including Adidas, On and Hoka, which have recently threatened to dethrone Nike as the number one sportswear retailer.
Nike has been criticised for a lack of new products that appeal to Generation Z customers. Schultz had previously taken aim at the brand for failing to produce products that customers wanted to buy, saying that shoppers felt “fatigue” towards familiar designs.
The French businessman, who replaced Peter Cowgill in 2022, claimed that JD Sports had continued to “outperform the global sportswear market” during the first-half of the year.
Operating profit at the retailer rose 6.7 per cent to a better-than-expected £451.1 million in the six months to the end of July, despite it warning of a £20 million hit from the strengthening pound. City analysts had forecast a profit of £419 million.
At the statutory pre-tax level profits fell 64.3 per cent to £126.3 million, down from £353.7 million, as it took a hit from the closure of its distribution centre in Derby. Sales over the period rose 5.2 per cent to £5.05 billion.
The retailer said footwear continued to trade better than clothing, which was held back by wet weather conditions in the UK and Europe. This had a knock-on effect on margin, it said, as the industry sold more stock at discounted prices.
Struggling Nike warned that it would have to be more promotional for the remainder of the year to get rid of stock, but Schultz said he did not plan to mimic those actions. “We always said that we have planned the same type of promotions as last year. I know that some of our competitors have a different view, but we push to be right.”
The retail group, which owns Millets and Blacks in the UK, said sales at the outdoor kit chain had declined 3.2 per cent to £263.3 million on the prior period as trading was negatively impacted by key product lines being delayed by Red Sea issues earlier in the year. Like-for-like sales in the category fell 5.3 per cent. JD Sports said poor weather in the second quarter had compounded the issue, reducing demand for seasonal outdoor living products such as tents and camping equipment.
JD Sports, which was established in 1981 in the northwest of England, has grown over the decades to become a major sportswear retailer across the world. Across the group it now has more than 4,500 stores, based mostly in the UK, as well as Europe and North America. Much of this growth has been driven by the roll-out of new stores, strategic partnerships with brands such as Nike and Adidas, as well as acquisitions.
JD has spent more billions on acquisitions since 2017, most recently on its New York-listed rival Hibbett Sports in a $1.1 billion deal. The purchase marked its biggest move into the US market after it acquired the Baltimore-based DTLR Villa for $495 million in 2021.
Clive Black of Shore Capital said JD Sports, which he described as “Bury’s finest global and footwear group”, was “completing a major period of M&A activity but wishes to sustain dividend flows at lower cover over time and, in the medium-term, subject to ongoing investment, states that returning surplus cash to shareholders is firmly on the board’s agenda, which we like.”
JD Sports boss bets on Nike turnaround
JD Sports’ chief executive is betting on Nike’s new leader to reverse the fortunes of the struggling shoe giant.
Signalling his hopes for a turnaround at its biggest brand partner, Regis Schultz said he was “very happy” about the appointment of Nike veteran Elliott Hill as its new chief executive.
Nike announced last month that it was bringing Hill, 60, back to the company to succeed John Donahoe, 64, who served as president and chief executive since January 2020.
The new boss will be tasked with turning around the sporting giant after a period of weakened demand, which has resulted in heavy discounting.
Schultz said JD Sports was looking forward to working with Hill. “He’s a great Nike guy, and I think he has all the experience and the quality to be a great CEO for Nike.”
He added that he expected Nike to return to its former glory: “I think we see Nike coming back. Nike will be fine. Nike is a strong brand.”
Nike said it was pinning its turnaround plans on increasing sportswear sales to “everyday runners” after it posted the biggest drop in quarterly sales since the pandemic on Tuesday.
Matthew Friends, its chief financial officer, said that its new strategy must include a focus on regaining market share in running shoes and clothes. “Nike’s a running company, Nike’s a running brand and it’s incredibly important for Nike to win with runners,” he said. “And so our commitment to reinvesting in those channels with those partners on the ground every day is how we’re going to change the trajectory of this business.”
JD Sports’ boss hit out at reporters on a call when asked if he was concerned about Nike pushing more into running, potentially moving away from fashion-led products.
He said the media were “making a big thing from nothing” by asking about Nike and that he did not worry about the brand’s new strategy.