27th Jun 2023 10:57
(Alliance News) - JD Sports Fashion PLC was the worst blue-chip performer on Tuesday morning, weighed down after reporting a moderation in sales growth in May and softening of trade in North America.
Shares were down 5.6% at 138.43 pence in London on Tuesday morning.
The sportswear retailer reported overall growth in organic sales at constant exchange rates of around 8% in May, compared to organic sales growth at constant exchange rates of more than 15% in the first three months of the year.
JD said the moderation in sales growth during the month reflected tougher comparatives in the year prior as the supply chain normalised and the availability of product improved.
It also noted that there had been some softening of trade in North America, which partially offset positive trends in the UK, Europe and the Asia Pacific region.
Russ Mould, investment director at AJ Bell, said terms like "softening in trade" and "moderation in growth" showed that even the most successful retail businesses can go through "bad patches."
Despite the 'bad patch', JD said on Tuesday that profit before tax and adjusting items in the financial year ending February 3, 2024 will be in line with market consensus, which it put at GBP1.04 billion. This would be up from GBP991.4 million in financial 2023.
"Brand power is still a powerful force, and even as belts are tightened elsewhere, the desire for the latest must-have trainers or kit isn't showing signs of slowing down dramatically," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
AJ Bell's Mould was more cautious: "Many people see trainers as collectibles, and they are happy to pay high prices in the belief they could be worth even more in the future. Yet if the recession clouds darken over the economy, particularly in North America, then there is a risk that the demand dynamic could change because of affordability factors."
Shore Capital noted that the softening of trade in North America was consistent with the wider sector and added that as JD remains "pleased" with the positive trading trends across all its regions, the company still appears to be "stable and resilient" in the face of market challenges.
"While conscious of the macro backdrop challenges, we maintain our buy stance on JD due to its strong structural position: the company's robust balance sheet allows it to out invest its peers, particularly in the US market. Furthermore, JD's recent acquisition of Courir provides the critical mass needed to complete effectively in the European market," Shore concluded.
By Heather Rydings, Alliance News senior economics reporter
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