JD Sports’ quarterly sales fall on weak UK but US shows improvement

JD Sports Fashion reported a steeper 3.0% decline in second-quarter like-for-like sales, but shares gained 4% as its crucial U.S. market showed signs of stabilization with a reduced 2.3% sales fall. The sportswear retailer maintained its full-year profit forecast of £852m-£915m, which is lower than the prior year and excludes potential tariff impacts, and announced a new £100m share buyback program, signaling confidence despite a cautious outlook for the second half due to selective consumer spending.

Analysis

JD Sports Fashion reported a conflicted second quarter, with group like-for-like sales declining by a steeper 3.0% compared to 2.0% in the first quarter. This was primarily driven by a significant 6.1% sales fall in the UK, which the company attributed to a challenging comparison against the prior year's Euro 2024 soccer tournament. However, the market reacted positively, with shares rising 4%, by focusing on the material improvement in the key North American market, which accounts for nearly 40% of revenue. There, the like-for-like sales decline narrowed substantially to 2.3% from 5.5% in the previous quarter, a result analysts at Peel Hunt deemed better than expected. Despite this stabilization, the company faces persistent headwinds, including a promotional retail environment and a drop-off in demand for Nike products, which represent 45% of its sales. Management maintained its full-year profit guidance of £852 million to £915 million, a decrease from the prior year, and notably, this forecast does not yet account for the potential impact of U.S. tariffs. The announcement of a new £100 million share buyback signals board confidence, though the CEO remains cautious about the second half, citing a consumer who is resilient but highly selective.

Key Decisions for Investors

• Consider the 4% share price increase on negative headline sales as a sign that market expectations were low, suggesting the stock's one-third decline over the past year may have priced in much of the bad news.
• Investors should closely monitor the unresolved risk from U.S. tariffs, which are excluded from the current profit guidance, and track trends in Nike product sales, given the brand's significant 45% contribution to revenue and cited demand weakness.
• The new £100 million share buyback signals management's confidence and could provide a floor for the stock, but this must be balanced against the cautious H2 outlook and the guided year-over-year profit decline.