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From HL.co.uk

JD Sports’ sales growth slowed in the third quarter, deciding to hold firmer on pricing than its competitors. That’s helped lift margins a little but means full-year profits are set to land at the lower end of previously lowered guidance, which markets didn’t react kindly to on the day.

The trading environment remains volatile, but recent cold weather should be a tailwind for JD heading into the peak season. Cost control is likely to remain a focus in the near term, and where demand trends from here will be key.

Looking past this softness, there’s a lot to like structurally about the market that JD operates in. The global sports apparel market is huge – valued at $396bn in 2023 and expected to grow to $544bn by 2028.

To service all this demand, JD’s continuing to expand its footprint through acquisitions and new store openings. The US-based Hibbett acquisition was substantial, further strengthening the group’s foothold in the world’s largest sportswear market. The acquisition of France-based Courir is set to complete in November, adding more exposure to the group’s fastest-growing region.

Filling the racks in these stores are exclusive items from the likes of Nike and Adidas. JD is known for its strong brand relationships and is even Nike’s single largest partner globally. Being able to offer these ‘JD Exclusives’ helps to lure customers into stores and boost market share.

The group’s sales mix by region is also better balanced than some of its biggest competitors, which helps smooth out bumps in the road if one market slows. With UK sales having a disappointing start to the year, this diversity is helping to keep growth targets alive. And because the group sits at the premium end of the market, it typically has healthier margins than many of its peers too.

But JD Sports faces challenges. CEO Régis Schultz hasn’t shied away from ambitious expansion plans in North America and Europe, but growth isn’t coming cheap. Its strong balance sheet means there isn’t currently cause for concern, but £0.5bn of additional capital spend for store expansion and the latest Courir deal does increase the pressure to keep running harder.

JD Sports' strategy execution is impressive and the growth opportunities are evident. But, with consumer sentiment and demand still uncertain, the company is taking a risk by expanding capacity ahead of market recovery.

The company’s valued at just 7.6 times forward earnings, significantly below its long-run average. This reflects recent disappointments and uncertainty surrounding the retail sector in the near term, so more ups and downs could lie ahead. But in the long term, we think the current valuation overlooks the company’s strong revenue and profit growth prospects.

How can JD have more stores and similar profits?

If 'sales per store' are down, a higher number or stores will offset the decline 'per store' yielding similar overall profits. However, a higher number of stores would have an impact on margins (higher overhead). It doesn't make sense, unless cost savings elsewhere (for example in the supply chain) are offsetting the higher cost of running more stores, with each store bringing in less profits, compared to the past two years.

Can anyone make some sense out of this?

The US stock has no influence whatsoever on JD.

A company making almost 1 billion pounds PBT valued 5.4 billions pounds. That's a ridiculous valuation

Mery - I don't believe any claim that people make on their trades. Especially when they lower their average after selling chunks to buy back in. All gains must be measured against the initial investment, not to the residual proportion of the original investment. If that was done at a fund management level, it would be straight up fraud. That is claiming stellar gains with no hard money to distribute to investors.

Bought some for 101. I am sorry for those who bought just yesterday. Being at the lower end of the guidance should have reassured the market that earnings are still in range. However it doesn't seem to be the case.

JD is a very long term recovery play. How did it reach a valuation of 240p post pandemic to drop to these levels is still a mystery to me.

Littleaston, better an exchange that is a joke for how cheap it is than one being a joke for the sky high price, where nothing is worth buying.

Falcon, all good points and a tangible risks of huge downside in 2 days as things are getting ugly (the only positive is probably the strengthening of the US Dollar).

Back to the business risks, why everything seems to be affecting JD but not, for example, Next?

If this TU doesn't move the needle, I don't know what else can help.

The downtrend is somewhat worrisome. Worrisome because a quick recovery seems unlikely. Historically JD has been fairly priced or underpriced. Never to this extent though.

All being well, with the end of uncertainties brought about geopolitical instability, provided that government stop the money print press (unlikely with Trump and Reeves at the reigns), we may see a share price recovery, but nothing extraordinary I'd say at this point. The painful wait may take years.

Does anyone have reasons to believe JD will upgrade its outlook?

in the last TU, JD has maintained its original guidance by adding in the contribution from Hibbett's earnings (which were previously excluded).

How things could have been changed after just over 1 year?

I don't expect too much in two weeks, unless I am missing something.

TheAccountant - Good move buying in at such a low price. My average is 180p. I thought that was a great deal but RWS has gone much cheaper.

The forecasted growth is not exciting (2%) but the valuation is extremely low. I would have guess we would see 250p before Christmas but my guess was routed.

When is the dividend declaration date?

Many fleet operators are now facing significant tax increases unless they take immediate action to revise their vehicle policies. The reforms particularly target vehicles that fall outside the Government's preferred pure electric model for company cars.

Strange retracing after the rise on the upbeat TU.

I am surprised the share price did not hit 50 as a minimum after the positive TU

The CEO may have wasted too much on GAS, and possibly on buybacks, and now he's possibly being ousted with a long notice in the attempt not to hurt the share price too severely.

There is lots of potential for downside here.

Who said that?

Lordlucan- I agree with you.

Our primary concern is stock market volatility over the potential of huge loss of innocent lives

I don't see how the currency exchange is an issue. True a strong GBP will cause a dent in profits it is also true that investing in the US and in Europe becomes cheaper.