Mild weather and discounting by rivals hit sales at JD Sports in October, prompting the trainers and fashion retailer to issue a warning that profits will be at the lower end of expectations.
The gloomy update sparked a sell-off among investors, sending shares down 14% and wiping about £800m off the value of the FTSE 100 company, which owns the JD chain as well as outdoor wear retailers Millets and Blacks in the UK and chains in the US and mainland Europe. Shares in its rival, the Sports Direct owner Frasers Group, also fell, by 2.5%.
Régis Schultz, the chief executive of the JD Sports Fashion group, 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.”
Underlying sales in the UK were down 2.4% in the three months to 2 November and 1.5% down in North America, offset by a 3.5% rise in Europe. The JD chain saw the toughest trading period with underlying sales down 1.6%. Alice Price, an apparel analyst at GlobalData, said JD had been affected as “consumers spend cautiously, with the wider sportswear market still experiencing suppressed demand”.
Sales rose 6% at the group’s outdoor wear business led by Millets and Blacks, helped by a rainy summer. Price cited “an appetite for outdoor experiences, and staycations [came] back into favour amid the normalisation in demand for foreign travel post-pandemic”.
JD said that, given the “volatile trading environment” and poor October trading, it now expected underlying profits to be at the lower end of its previous hopes of £955m to just over £1bn.
The poor figures from JD are likely to raise fears about another difficult winter for fashion retailers as weak consumer confidence combines with unseasonable weather to put a dampener on spending.
High energy bills and increasing mortgage and rental costs for many continue to affect spending on non-essentials, while households appear to have prioritised holidays or other experiences this year.
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The British Retail Consortium has already flagged that fashion saw the biggest sales declines in October – followed by toys and furniture – while computing and health and beauty sales are booming.