Shares in JD Sports Fashion PLC (LSE:JD.) climbed as much as 7.5% in early trading on Friday, buoyed by signs that Nike Inc (NYSE:NKE, ETR:NKE), the UK retailer’s key partner, may have turned a corner in its challenging turnaround effort.
Nike reported an 86% drop in quarterly profit to $211 million, largely due to deep discounts and efforts to clear excess inventory.
Despite the steep decline, results beat Wall Street forecasts, and executives struck an optimistic tone about the months ahead.
Nike expects sales and earnings to stabilise, though it warned of new pressures from US import tariffs on Chinese goods, estimating a $1 billion cost this year.
Analysing the Nike results and their impact for JD, Shore Capital saw reasons for guarded optimism.
"Overall, the double-digit sales decline for Nike has undoubtedly been a significant headwind for JD and there is still more work to do before the company sees a return to revenue growth and in continuing to clean the inventory position," the broker said.
"However, with this update, we do see early signs of an improving wholesale channel."
Nike shares jumped 10% during a post-results call as the company pledged to cut costs, rebalance its supply chain, and shift back to its roots in sports performance.
In early trade, JD's stock jumped 4.73p to 86.43p.