JD Sports’ stronger performance dented by tough October, guides for profit at lower end of range

JD Sports Fashion’s Q3 results on Thursday showed times are tough out there but the expanding retail business is “well positioned” for the peak season despite a dip in sales.

The company said that group sales edged down by 0.3% on a like-for-like (LFL) basis, although Europe excluding the UK was a particularly strong performer.

It said the good August and September was offset by a softer October. And on an LFL basis, “stores continued to outperform online and footwear continued to outperform apparel in the period”.

All segments achieved ‘organic’ sales growth in the period (which includes all stores), driven by new space growth in JD and Complementary Concepts, and by LFL sales growth in Sporting Goods & Outdoor. 

Without giving monetary figures, the firm said UK sales fell 2.4% LFL and dropped 0.1% organic, while Europe was up 3.5% and 10.4% on those measures. North America was down 1.5% LFL and up 5.9% organic while Asia-Pacific was down 3.8% on the first measure and up 5% on the second.

The quarterly figures for the UK and Europe were slightly better than the year to date, although North America and Asia Pacific were lower on that basis and overall group sales in the year to date were up 0.5% LFL and 6.1% organic.

Looking at its separate divisions, the company said the JD chain and webstores fell 1.6% LFL and rose 6.2% organic during the quarter, while Complementary Concepts dropped 1.3% LFL and rose 0.4% organic. Sporting Goods & Outdoor rose 6% and 5.5%. 

CEO Régis Schultz said: “After a good start to the period, helped by strong back-to-school sales, we saw increased trading volatility in October, particularly in North America and the UK, reflecting elevated promotional activity and mild weather. Against this backdrop, we maintained our commercial discipline, improving [our] gross margin… while still delivering organic sales growth. In addition, we made further, strong progress on our long-term growth strategy.

“We have performed well in the key trading events this year and we are well positioned for the upcoming peak season. The trading environment remains volatile though.”

The company had a buoyant back-to-school period, as mentioned, but saw much softer consumer demand and trading toward the end of the period, “reflecting elevated promotional activity, unseasonable weather and a cautious consumer, with evidence supporting suppressed demand in the US ahead of the election”. 

But it maintained its “operating discipline to deliver on our long-term commercial strategy rather than a short-term sales focus”. As a result, gross margin for the group in the period increased 0.3ppts to 48.1% with the year-to-date gross margin for the group now at 48.2%, in line with the corresponding period.

It added that the “strong strategic progress” saw it opening 79 new JD stores, taking the total number of openings by the end of Q3 to 181. The total number of stores at the period end was 4,541, up 1,224 from the start of the year, including 1,179 stores acquired with Hibbett. 

It has also “made good progress on the process to complete the acquisition of Courir”. It expects the transaction to complete shortly, “adding a strong and growing, female-orientated fascia to complement our global portfolio”.

But given the “volatile trading environment, and following October trading”, it now expects profit before tax and adjusting items (PBT) “to be at the lower end of our original guidance range of £955 million-£1,035 million”.