JD Sports shares plunge 20% after profit warning

Shares in JD Sports have plummeted by more than 20% after the sportswear seller issued an profit warning.

The company said its profits would be about £125m lower than previously predicted after a worse-than-expected festive trading period.

It blamed more promotions and price discounting than anticipated, which it said reflected “more cautious consumer spending”.

It also said milder autumn weather impacted sales.

Competition between retailers was fierce in the run-up to Christmas as customers, under pressure from higher prices and borrowing costs, shopped around for the best deals.

JD Sports said there were more promotions than it expected, but did not specifically state whether the impact on its margins was as a result of discounts in its own stores, or through rivals cutting prices to take business away.

It said it now expects its profits to be between £915m and £935m for its financial year ending in February.

“Our key markets have seen increased promotional activity during the peak trading season, driven by a more cautious consumer, but we continue to grow market share,” said chief executive Regis Schultz.

Mr Schultz said the company’s board was “confident in our strategy”.

JD Sports is one of the UK’s biggest sportswear retailers and a FTSE 100 company. It has 3,377 stores around the world.

Victoria Scholar, head of investment at interactive investor, said JD’s trading update was “somewhat of a reality check” for the company, which she said had appeared to be “navigating the pressures from the cost-of-living crisis”.

“When one of the biggest names in retail issues a profit warning, you know life is hard for the sector,” said Russ Mould, investment director at AJ Bell.

He added consumers were opting to spend on “things they really need”, rather than the kind of items sold by JD Sports.

“JD’s products fall into the discretionary spending category – they are nice to have, but not essential,” he said.

Mr Mould said JD Sports was not alone in slashing prices to attract sales, adding that others including Zara’s owner Inditex, H&M and Asos had announced similar moves.

But while JD struggled, its High Street neighbour Next enjoyed cheerier Christmas sales and raised its profit prediction to £960m.

Mr Mould suggested Next stocking items such as coats and jumpers could explain why the retailer fared better, adding that it was “better positioned to capture the ‘essentials’ trade”.