(Reuters) – British sportswear retailer JD Sports Fashion lowered its full-year profit forecast on Thursday as rising costs and weak consumer spending hurt demand during peak season.
UK retailers have seen sluggish growth as inflation prompts consumers to cut spending.
On the London Stock Exchange, JD Sports Fashion PLC shares collapsed by 22.10% at 09:15 GMT. It brought in its wake sports equipment manufacturers Adidas (-3%) and Puma (-3%).
Weaker demand and greater-than-expected promotional activity also reduced gross margins during the peak season, which runs 22 weeks through Dec. 30, JD said.
The gross margin rate for the whole year will be slightly lower than last year.
Clothing revenue growth was also affected by milder weather conditions, according to the group.
The company, which sells the Nike and Adidas brands among others, now forecasts profit before tax and adjusted items of 915 to 935 million pounds (1.06 to 1.08 billion euros) for the financial year ending 3 FEBRUARY.
The group and analysts had previously forecast an annual profit of around 1.04 billion pounds.
“The consumer is cautious and bargain-hunting, and in the absence of particularly exciting launches, it has been a lackluster period,” analysts at Peel Hunt commented in a note.
In late December, Nike lowered its annual revenue forecast due to cautious consumers, weaker online activity and more promotions.
For the 22 weeks ending December 30, JD Sports says its like-for-like organic revenue increased 1.8%, slightly less than expected.
The UK’s largest sportswear retailer expects organic revenue growth of around 8% for the full year.
“Our key markets saw an increase in promotional activity during peak season, due to a more cautious consumer, but we continue to increase our market share,” commented CEO Régis Schultz in a statement.
On the other hand, Next, another British retailer, on Thursday raised its profit forecast for the year to the end of January 2024, for the fifth time in eight months, thanks to higher than expected sales during the Christmas period.
(Written by Eva Mathews in Bangalore, Kate Entringer, edited by Blandine Hénault)
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