JD Sports Fashion Plc shares took a dive on Thursday morning after the shoe and apparel retailer warned about a hit to its annual profits.
The U.K.-based athletic retailer said in a release that sales in the 22 weeks leading up to Dec. 30 fell short of expectations, with constant currency organic revenue growth of 6 percent. Apparel growth in the period was impacted by “milder weather” in the back half of September. A broader promotional environment and overall cautious consumers also hurt sales during peak seasons.
For the full year, JD now expects profit before tax and adjusted items to be between 915 million pounds and 935 million pounds (or between $1.16 billion and $1.19 billion at current exchange), down from its prior estimate of 1.04 billion pounds (or about $1.33 billion).
Shares of JD Sports, which carries brands like Nike and Adidas, were down by more than 20 percent following the announcement on Thursday.
Gross margin rate for the reported period was in line with last year’s results, which were lower than expected due to a high level of promotional activity. Full-year gross margin is estimated to be lower than last year.
“Our key markets have seen increased promotional activity during the peak trading season, driven by a more cautious consumer, but we continue to grow market share,” said JD Sports CEO Régis Schultz in a statement. “We are confident in our strategy and we continue to invest in our supply chain, systems and stores, supported by our strong cash generation and healthy balance sheet.”
The updated outlook comes after other athletic brands like Nike warned of cautious consumer behavior in the most recent quarter. Nike in December announced new measures to “streamline” its organization after reporting a profit beat for the second quarter and said it sees the potential to save up to $2 billion in costs over the next three years by simplifying its product assortment and streamlining its organization, among other things.
Foot Locker also mentioned the uncertain macro environment in its most recent earnings report. Comparable-store sales dropped 8 percent in the third quarter due to “ongoing consumer softness, changing vendor mix and a 3 percent negative impact from the repositioning of Champs Sports,” Foot Locker said.
