Back to school month is a good indicator for Spring/summer 2025 orders and should be something to watch for in JD Sports Fashion PLC (LSE:JD.) update tomorrow, suggests Swiss bank UBS.
Top sportswear retailers in the US (more than 40% market share) are also about to start their earning season.
Back to School season often dictates the level of orders for next year's summer/spring season, notes UBS, though this year might be a little different.
Disruption from Red Sea and Suez hold-ups, stock build-ups due to tariff concerns and high Asia shipping costs might affect volumes delivered.
The ports on the West Coast saw a record high level of volume delivered in July and UBS is concerned over overstocking.
That said, it still expects a good update from JD Sports and a reassuring tone on North America.
On a group level, UBS expects +3% LFL growth despite softer trends for its key vendor, Nike, though the key focus will be on its profit guidance, which is likely to be raised to reflect the Hibbett acquisition.
For the sector overall, the level of inventories will be the key data point for the sportswear brands.
Both adidas (Buy) and Puma (Neutral) aim to deliver DD sales growth in 2025 which, in UBS's view, does not seem to assume a deterioration in the US market.
"With current brand momentum, we are less concerned about adidas performance within the US.
"While for Puma, in our view any further deterioration in the US market would make it even more challenging to achieve the 2025 amid the intensifying competition in the wholesale channel from both ADS and NKE (Neutral)."
Watch carefully the level of promotional activity from the retailers in the US, particularly in the apparel category; a ratio of inventories to retail sales held by wholesalers; and any changes to the level of footwear production and export from Vietnam.