JD Sports Fashion lowered its full-year profit forecast on Thursday, citing higher costs and subdued consumer spending in the peak season, sending the British sportswear retailer’s shares down nearly 21%.
Retailers in the United Kingdom have experienced tepid growth as the ongoing cost-of-living squeeze prompts shoppers to rein in spending. Apparel retailers across Europe like H&M and Superdry have also seen a slower start to the autumn-winter season amid unusually warm weather.
Softer demand and more promotional activity than expected dented gross margins in the peak 22-week period ended Dec. 30, JD said, adding that its full-year gross margin rate will be slightly lower than last year.
Shares in the company, among the first non-food retailers to issue a post-holiday trading update, dropped to a one-year low of 123.40 pence, making it the top loser on London’s blue-chip FTSE 100 index.
Sportswear peers Frasers Group, which owns Sports Direct, Adidas and Puma were also down between 1% and 5% on Thursday.
JD, which sells Nike, Adidas and other sports fashion ranges, now expects profit before tax and adjusted items of 915-935 million pounds ($1.16-1.19 billion) for the year ending Feb. 3.
That is down from a previous expected profit in line with market expectations of around 1.04 billion pounds.
“The consumer is cautious and looking for a deal and with no especially exciting launches, it has been a dullish period,” Peel Hunt analysts said in a note.
Late last month, Nike trimmed its annual sales forecast blaming cautious consumer spending, a weaker online business and more promotions.
JD Sports said its like-for-like organic revenue increased 1.8%, slightly less than expected, for the reported period.
The UK’s biggest sportswear retailer expects full-year organic revenue growth of about 8%, compared with the 12% growth it posted last year.
In contrast, British clothing retailer Next on Thursday raised its profit forecast for the year to end-January 2024 for the fifth time in eight months on a better-than-expected rise in Christmas sales.
