Inflation deterring shoppers from spending, especially in the US, says high street chain
The sports fashion retailer JD has cut its profit forecasts as cost of living pressures, fuelled by the US war on Iran, weighed on sales of trainers.
JD Sports, which sells brands including Nike and Adidas, said widespread inflation had hit shoppers’ wallets, resulting in a drop in sales across important markets such as the US, where it struggled to shift trainers and other footwear.
Bosses went on to warn that the wider fall in consumer spending was likely to continue into the second half of the year, leading to lower-than-expected profits. The retailer now expects pre-tax profits of between £700m and £800m for the full year, having previously hoped to reach £750m to £850m.
The news led to a 12% drop in JD’s London-listed shares on Thursday morning to their lowest level since July.
Régis Schultz, chief executive, said: “Trading in the second quarter remained tough,” t adding that the company had been forced to cut prices and offer promotional sales to compensate, as “our core consumer was impacted by incremental cost of living pressures.”
The company, which runs 4,800 stores worldwide including the JD, Blacks and Millets chains in the UK, said pressures included higher fuel prices, which have been pushed up by the US-Israeli war on Iran which has effectively stopped tanker traffic through the strait of Hormuz.
Overall, JD said like-for-like sales fell by 3.1% in the second quarter, with its North America operations taking the biggest hit, down by 6.8%. Sales across Europe were down 2.7%.
The UK was a rare bright spot as World Cup excitement drove sales of football replica kits, while consumers bought more outdoor gear, including from its high street brands Blacks and Go Outdoors.
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Susannah Streeter, chief investment strategist at the investment firm Wealth Club, said: “JD Sports is offering another glimpse of the darkening clouds gathering over the US economy, with American shoppers looking considerably more cautious.
“The sneaker is fast becoming a canary in the coalmine for confidence. More consumers are resisting the lure of hyped brands, which is not surprising when the jobs market is weakening and inflation is still such a concern. Consumers may still be spending, but they are becoming more selective about discretionary purchases, particularly when household budgets are already under pressure.”
