RE: Massive volumes today24 Sep 2025 14:40
JD Sports' first-half performance was largely as expected, with recent acquisitions flattering performance and helping total sales rise 20%. Stripping out the impact of these acquisitions, like-for-like sales declined by 2.5%, which isn’t insignificant when margins are already fairly thin.
Trading across Europe and the UK remains weak, especially in the latter. Year-on-year numbers have faced a tough comparative period, which got a foot up from the men's 2024 Euros. We remain cautious about the outlook for the UK, with recent changes to employer taxes and minimum wages bringing a handful of extra costs and challenges.
The US has been a major pain point in recent times due to a combination of a tough macroenvironment, product launch delays and heavy discounting by peers. JD’s been holding firmer on pricing than competitors, who have leaned into more promotional activity to help clear stock. While like-for-like sales are still in negative territory, there are early signs that trends across the pond are improving.
Acquisitions in the US and France have massively expanded the group’s footprint. The focus is now on converting them to the JD brand and leveraging the cost efficiencies this increased scale can bring is a key part of the plan. While early progress on this front looks promising, there’s still a long road ahead.
The Hibbett acquisition means that the US is now JD Sports’ largest region by sales (H1: 39%). Despite this, the direct impact of tariffs on its operations isn’t expected to be material. We’re keeping a close eye on the indirect impact of tariffs, which could ultimately weigh on consumers’ spending power. Given that JD sells discretionary items, if the economic outlook deteriorates, JD is likely to suffer more than some other areas of retail.
Group expectations for underlying pre-tax profits of around £878mn this year point to a decline of around 5%. And after a slow start to the year, there’s a lot of work to be done in the second half if this target’s to be met, and we wouldn’t be surprised to see the group falling just short.
Looking past the near-term uncertainty, we’re pleased with the change of focus from expansion to squeezing the most out of its store footprint. That should strengthen the balance sheet and increase shareholder payouts, although there are no guarantees.
The challenges look priced into the current valuation, which sits well below the long-run average, offering both upside potential and some downside protection. We think this could be an attractive entry point for potential long-term investors. However, there are plenty of challenges in the near term, including tariff uncertainty and weak consumer sentiment, so be prepared for a bumpy ride.
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