The sports fashion retailer JD has said that profits will fall this year amid a “muted market” hit by concerns about the Middle East conflict and weaker spending by young people facing rising unemployment.
The company, which runs 4,800 stores worldwide including the JD, Blacks and Millets chains in the UK, said it expected profits of between £750m and £850m in the year ahead, after reporting £852m in the year to the end of January.
Régis Schultz, the retail group’s chief executive, said its core youth market had been hit by rising unemployment, adding: “Those 10-30 hour contracts they do allow them to buy the sneakers they would love to have.”
He said this was not just a UK problem, with sales to 14-18 year olds down by more than 10% across Europe, including the UK, according to industry data.
JD said there had been “no material business impact to date” from the war in Iran, but the company warned that the conflict may end up pushing up costs and prices.
The company said: “Over time, the potential future impacts of heightened uncertainty may contribute to direct cost pressures, including energy and fuel costs across our store and logistics networks, respectively, as well as potential indirect impacts on pricing and consumer demand should input cost inflation emerge.”
However, Schultz said JD had no intention of charging shoppers more as “we don’t believe the market and the consumer is ready for price increases. There is not enough heat in the market.”
He admitted that brands, such as Nike, also needed to innovate to tempt shoppers to buy as the shift from formal to sports footwear had slowed.
Shares in JD, which has partnerships with the boxer Anthony Joshua and the YouTuber Chunkz, rose almost 10% on Thursday, making them the biggest riser on the FTSE 100.
JD does not expect an increase in sales this year, excluding the impact of acquisitions, after recording flat sales in the three months to the end of April. That came after an increase of 2.1% in the year to January to £12.66bn.
The UK was the worst-performing market in the year, with sales down 2.5%, offset by growth elsewhere in Europe and the US.
JD said cold and wet weather since the end of the financial year had dampened sales and that trading in April had been “volatile”, with a strong Easter performance followed by fewer visitors to shops.
JD, which operates the Finish Line chain in the US and Sprinter in Spain also said sales were likely to be affected by “ongoing product cycle evolution at some of our major brand partners, particularly in footwear” – a reference to problems at Nike.
Schultz said JD was aiming to use more automation and AI to improve the efficiency of its supply chain and choose the right product. It also indicated it would continue shifting towards fewer larger stores in the UK – where it closed 24 outlets in the past year but increased selling space by 4%.
