JD Sports warns profits will be at lower end of expectations

(Sharecast News) - JD Sports Fashion cut its full-year profits outlook on Thursday, after uncertain economic conditions weighed on trading. Updating on trading ahead of the crucial festive shopping season, the retailer said it now expected pre-tax profits before adjusting items to come in at the lower end of market forecasts.

Analysts had been expecting pre-tax profits in the range of £853m to £888m, with consensus currently for £871m.

JD Sports blamed a "year of volatility", including rising unemployment levels and softer consumer sentiment.

Regis Schultz, chief executive, said: "As we enter an important trading period, we are mindful of recent weak macro consumer indicators in our key markets.

"These lead us to take a pragmatic approach for our full-year profit outturn."

Total sales in the 13 weeks to 1 November, including acquisitions, rose 8.1% on a constant currency basis. However, like-for-like sales fell 1.7%.

Driving the decline was the UK, which saw comparable sales slide 3.3%. In North America, they were 1.7% lower and down 1% in Europe. Only Asia Pacific saw any growth, up 3.9%.

JD Sports said that while there had been a "solid" performance in apparel during the third quarter, footwear had been more challenging.

Schultz added: "We are navigating a year of volatility in external factors with disciplined execution, reflected in a solid third quarter.

"We remain confident in the overall positive trajectory for our industry and JD Group over the medium term."

As at 0815 GMT, shares in the blue chip were down 1% at 79.37p.

Shore Capital put both its 'buy' rating and full-year profits forecast under review following the update.

It said: "While the company is impacted by a challenging macroeconomic environment, including rising unemployment and continued consumer caution, it is nonetheless disappointing to see a further cut to guidance.

"The key question here is whether we have seen peak 'ath-leisure', and so expect continued market headwind going forward.

"We don't think this is the case, but today's update does increase our caution on the medium-term outlook."

Richard Hunter, head of markets at Interactive Investor, said: "The statement equates to another profit warning amid an unrelenting environment."

Hunted noted that JD Sports had first reduced its profit forecast, to between £915m and £935m from £955m to £1.035bn, in January, before trimming it once more later in the year and again on Thursday.

"While the group describes the lower forecast as a pragmatic approach...the news comes as a blow to patient investors.

"The strategy remains intact, but the delivery is proving to be a stumbling block."