JD Sports sees overall 'low' impact from tariffs, though sales make stumbling start

JD Sports Fashion PLC reported a 4% decrease in underlying profit before tax to £923 million for the year ending February 1, 2025, despite a 10.2% increase in revenue to £11.46 billion. First-quarter trading for the new financial year is in line with expectations, with organic sales up 3.1% but like-for-like sales down 2.0%, and the company anticipates a "low" overall impact from US tariffs; CEO Régis Schultz expressed confidence in outperforming the market and improving profit margins in the medium term.

Analysis

JD Sports Fashion PLC reported a 4% decline in underlying profit before tax to £923 million for the year ended 1 February 2025, falling within its guided range, despite a 10.2% increase in revenues to £11.46 billion (12.0% at constant currency). Organic sales grew 5.8% for the year, though like-for-like (LFL) sales saw minimal growth of 0.3%. Trading in the first quarter of the new financial year has been in line with expectations; organic sales increased by 3.1%, primarily driven by a 5.1% contribution from new store openings, while LFL sales contracted by 2.0% amidst a volatile and promotional market, particularly online. Regionally, Q1 LFL sales performance was varied, with North America and Asia Pacific declining by 5.5%, contrasting with modest LFL growth in Europe (0.7%) and the UK (0.4%). Despite these challenges and uncertainties surrounding US tariff changes, which the company anticipates will have a "low" overall impact, management expressed medium-term confidence in outperforming the market and improving profit margins. The company also demonstrated commitment to shareholder returns, increasing its total dividend by 11.1% to 1p per share and launching a £100 million share buyback program post year-end, supported by a 7.2% rise in operating cash flow after lease repayments to £1.25 billion.

Key Decisions for Investors

• Investors should weigh the contrasting signals of robust revenue growth and shareholder-friendly capital returns against the decline in profitability and concerning like-for-like sales contraction, particularly in the North American and Asia Pacific markets.
• Careful monitoring of the company's ability to navigate the promotional retail environment and execute margin improvement strategies is crucial, especially given the current reliance on new store openings for organic sales growth rather than LFL improvements.
• While management's confidence regarding a low impact from US tariffs and its medium-term outlook provides some reassurance, the significant disparities in regional LFL performance warrant close attention to gauge the effectiveness of turnaround efforts and the sustainability of growth.