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Shares in JD Sports Fashion plummeted 22% on Thursday as the sportswear retailer slashed its guidance, in another sign of a slump in the global sportswear market following Nike’s warning of a drop in consumer spending last month.
JD Sports Fashion
JD,
has cut its profit guidance, citing weaker-than-expected sales during its peak trading period.
The Manchester-headquartered retailer on Thursday said sales in the peak 22-week period ending Dec. 30 fell behind its expectations, in a trading update.
The FTSE 100 company blamed mild September weather and “cautious consumer spending” for its softer-than-expected sales as it slashed its pre-tax profit guidance for the full-year ending on Feb. 3 from £1.04 billion ($1.3 billion) to between £915 million and £935 million.
JD Sports said higher spending on promotional activities, in the face of a slowdown in consumer spending, would see it achieve lower profit margins compared to last year.
The U.K. retailer, which started out as a single shop in the Manchester suburb of Bury in 1981, said it achieved slower than expected growth in the 22-week-long peak trading period, that saw it post constant currency revenues growth of 6% and like-for-like growth of 1.8%.
Shares in apparel sellers Puma
PUM,
and Adidas
ADS,
both dipped 3% following JD Sports’ announcement.
JD Sports’ trading update follows Nike’s decision to slash its own guidance in December, due to an anticipated drop in consumer spending in its Europe, Middle East, and Africa and Greater China Regions.
Nike
NKE,
in turn, outlined plans to make $2 billion worth of cost savings over the next three years, as it said it expects its revenues to grow by just 1% compared to previous forecasts it would achieve mid-single digit growth.
In February, JD Sports CEO Régis Schultz outlined plans to invest £3 billion in opening 1,750 new stores worldwide, at a rate of 250 to 350 each year. In a statement on Thursday, Schultz said the company had made progress toward its plans in opening 200 new stores this year
“Our key markets have seen increased promotional activity during the peak trading season, driven by a more cautious consumer, but we continue to grow market share,” Schultz added. “We are confident in our strategy and we continue to invest in our supply chain, systems and stores, supported by our strong cash generation and healthy balance sheet.”
The news wasn’t all bad for U.K. retailers as clothing retailer Next
NXT,
lifted its guidance, sending shares up 5%.
Most European stock markets were higher in late morning trade, with the German DAX
DX:DAX
up 0.3%, the French CAC 40
FR:PX1
up 0.4% and the FTSE 100
UK:UKX
up 0.1%.
