Shares of JD Sports Fashion plc, the Bury-based FTSE 100 retailer, rose as much as 16% after it published a trading update for the 53 weeks to February 3, 2024, and guidance for FY25.

“FY24 profit before tax and adjusted items (PBT) expected to be in line with the £915-935m guided range … ” said the Bury retailer.

“Total sales grew 3.6% to £10.5bn while gross margins were 47.3% …

“Initial FY25 PBT guidance, pre-accounting adjustment, of £900-980m.”

In its FY25 guidance, JD Sports Fashion said: “Trading since the start of the new financial year has been in line with our expectations.

“The market remains challenging due to less product innovation and elevated promotional activity in key markets, particularly online.

“We anticipate trading conditions will improve as we move through the year, helped by a busy sporting summer, softer comparatives with last year from Q2 and an improving product pipeline towards the end of the year.

“Given this, Q1 is likely to be the softest LFL period of the year and H2 is likely to be stronger than H1. In addition, cost inflation remains elevated, particularly labour, and we will continue to invest in our infrastructure in FY25 to deliver our long-term growth plan.”

JD Sports Fashion CEO Régis Schultz said: “In our FY24 financial year, we outperformed the sportswear market, reflecting the strength of our business.

“We achieved like-for-like sales growth of over 4%, organic growth of over 8% and our athleisure fascias achieved organic growth of over 10%.

“We made good strategic progress, opening 215 new JD stores, and focusing our effort on developing JD and enhancing EPS through taking full control of ISRG and MIG. We expect profit before tax for the year to be in line with the guided range given in January.

“Looking ahead, the current trading environment remains challenging due to less product innovation and elevated promotional activity, especially online.

“We anticipate trading conditions will improve as we move through the year, helped by a busy sporting summer and softer comparatives with last year.

“We continue to invest in our people and the infrastructure needed to deliver our long-term growth plan. I am excited about the opportunities for the JD Group going forward and our ability to deliver attractive returns to shareholders.”

REACTION:

Guy Lawson-Johns, equity analyst, Hargreaves Lansdown: “JD Sports’ full-year trading update points to a weakening market as sales only inched 0.1% higher. JD’s biggest region, UK and ROI, saw sales decline 3.2% in the fourth quarter as apparel underperformed and the choice to not fully engage with discounting hurt demand.

“Analysts are expecting next year’s profit before tax to land at the very top end of JD’s £900-980mn 2025 guidance, which could be a tall order if challenging markets prevail.

“But the future fortunes of JD remain inexplicably linked to Nike’s success. Estimates suggest Nike sales contribute to 50-55% of JD’s sales globally. The closeness of its relationship provides the exclusive products and competitive pricing that lures in punters to part with their cash, but it also creates a dependency.

“Tough sales comparisons and a subdued economic outlook have impacted much of the market. While JD’s been opening 215 new stores, Nike’s been laying the foundations for portfolio modifications and a renewed focus on brand activation.

“Reports that wholesale channels will be key to this and plans for partner investment will come as welcomed news. But when JD will see the benefits remains unknown.

“Nike’s master plan includes intentionally reducing supply of key product lines. The shift to a newer, more innovative portfolio should create some much-needed excitement, but the cost of potential supply reductions to wholesale partners like JD remains to be seen.

“If this lifecycle management is executed well, long term we could see a reduction in the type of discounting which contributed to JD’s outlook disappointment in January.

“But investors should be prepared for short-term headwinds. And JD’s focus away from performance wear, may mean it misses out on the Paris Olympics demand uplift Nike Direct are banking on.

“As more of a taker than shaper in its relationship with Nike, JD will have to see how this impacts the top line.”