JD Sports Fashion PLC (LSE:JD., OTC:JDSPY) has been dealt another setback after Shore Capital cut its rating to 'hold', following a further slide in like-for-like sales and yet another trim to profit guidance.
It now expects full-year pre-tax profit of about £850 million, the bottom of the range management had already set out.
ShoreCap noted that like-for-like sales fell across all major regions for a third consecutive quarter.
Store openings and refurbishments are still supporting reported revenue, but without growth from existing sites, the group struggles to claw back rising labour and operating costs.
Margins have compressed accordingly. Adjusted pre-tax profit has retreated from £991 million in FY23 to £923 million in FY25, with this year’s £850 million guidance extending the slide.
The environment explains much of the strain. JD’s customer base skews young and price sensitive and has yet to feel much benefit from headline improvements in household finances.
UK unemployment has ticked up to 5% and consumer confidence remains low.
Germany and the US, JD’s other major markets, show much the same tone.
Charts on pages 3 to 5 of ShoreCap’s note underline the mismatch between rising incomes and subdued retail spending and sentiment.
Warm September weather also held back seasonal demand for apparel. Strip out the recent acquisitions of Hibbett and Courir and the core business looks weaker still, with underlying revenue up only 2% and pre-tax profit down about 4% last year.
There is at least strength in the cash flow. Despite spending around £1 billion on acquisitions, JD ended FY25 in a small net cash position, excluding leases and has begun returning cash to shareholders.
Buybacks of £200 million and dividends of £50 million are planned this year, worth 6.6% of the current market value, and ShoreCap still expects around £400 million of free cash flow. Forecasts rise to £660 million in FY27 and £750 million in FY28 as exceptional costs ease and capital spending moderates.
Convincing investors is the challenge. Two years ago, £1 billion of profit seemed within reach.
Since then, guidance cuts have become routine and consensus forecasts have drifted lower, as shown in the charts on page 7.
Shares have been locked between 70p and 100p for much of the year and ShoreCap argues they will stay there until JD can show steady, quarter-by-quarter earnings progress.
The valuation is not demanding. At 73p the shares trade on roughly 6 to 7 times earnings and about 3.5 times enterprise value to EBITDA. Even so, ShoreCap has trimmed its fair value from 100p to 85p and moved to Hold on the basis that visibility on profit recovery remains limited.
JD looks more weather-beaten than worn out. Cash generation offers support but the shares need clearer evidence that sales and margins can begin to recover.