Sportswear giant JD Sports Fashion said its annual profit would come in lower than it had previously forecast due to higher than anticipated market headwinds.
The Manchester-based retailer said it expects pre-tax profits of between £915 million ($1.1 billion) and £935 million for the year to February, down from its previous estimate of £955 million and £1.035 billion.
JD Sports had warned in November that its profit was likely to be at the lower end of its guidance because it was facing a “volatile trading environment.”
The retailer’s shares fell by almost 13% in early trading, before finishing the day with a loss of nearly 7%. The stock has slumped more than 20% over the past year.
JD Sports reported that like-for-like revenue across November and December fell 1.5% in a “challenging and volatile market that saw increased promotional activity.” The company’s organic revenue grew 3.4% in the same period.
Like-for-like revenue is now expected to remain flat for the full year, and organic revenue is forecast to grow at around 5%.
JD Sports’ CEO Régis Schultz said they chose not to participate in a higher-than-expected level of promotional activity because it was focused on delivering improved gross margins, clean inventory and strong cash management.
“While I am pleased overall with our performance, market headwinds were higher than we anticipated and therefore our full year profit forecast is slightly below our previous guidance” Shultz said. “With these trading conditions expected to continue, we are taking a cautious view of the new financial year.”
JD Sports said its gross margins are expected to be around 48%, which is in line with last year’s figure.
The retailer said like-for-like revenue growth in Europe and Asia Pacific managed to partially offset weaker sales across the U.K. and North America. JD Sports has a worldwide network of 4,558 stores.
JD Sports expanded its network when it acquired athletic fashion retailer Hibbett for about $1.1 billion in April last year as part of its plan to continue growing its share of the world’s largest sportswear market.
JD Sports, which calls itself the “King of Trainers,” is a major retailer of sportswear and footwear, offering a range of products from Nike, Adidas, New Balance and others alongside its own brands that include Hoodrich and Supply & Demand.
JD Sports is named after its cofounder John Wardle and David Makin. They first established the business in 1981 in in Bury, Greater Manchester.
The retailer’s cofounders sold a 45% stake in JD Sports to the Pentland Group in 2005. Later, the group increased its ownership to 52%.
Pentland is one of the U.K.’s largest sports apparel companies with a portfolio of brands that includes Speedo, Berghaus, Mitre and Canterbury of New Zealand. The group says it generates $8 billion in annual sales, while employing more than 76,000 people.
Pentland, which was founded in 1932, is owned by the Rubin family. The group’s current chairman is Stephen Rubin, is featured on the Forbes Real-Time Billionaires list with an estimated net worth of $1.9 billion.
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