JD Sports Fashion PLC has seen its shares plummet nearly 10% amid rising concerns over potential US tariffs on Asian imports, particularly affecting major partners Nike and Adidas. The stock, which closed at 64p on April 3, 2025, has not been this low since 2017, reflecting a broader unease in the European sportswear sector following Donald Trump's recent tariff announcement.
Investors are anxiously awaiting a trading update from JD Sports scheduled for April 9, 2025, as they seek clarity on how these tariffs will impact the company's operations. The news comes as Nike shares fell approximately 7% in after-hours trading in the US, while Adidas suffered a more severe drop of 9.5% in Germany. Analysts at UBS have indicated that the situation is dire, highlighting that Vietnam's 46% tariff is significantly worse than previously anticipated. This country serves as a major exporter of footwear to the US and is a critical manufacturing hub for the industry.
UBS analysts further noted that offsetting these Vietnam-specific tariffs would necessitate price increases of around 10-12%. However, they cautioned that such increases might be challenging to implement, especially considering the broader proposed tariffs on other Asian countries. This uncertainty has left JD Sports and its peers grappling with how to maintain profitability without resorting to heavy discounting.
According to analysts at Hargreaves Lansdown, JD Sports has been attempting to hold firm on pricing, unlike many competitors who have opted for promotional strategies to clear inventory. While this approach has somewhat protected margins, it has not shielded profits and cash flows from the ongoing market turbulence. The retailer had already warned in January of lower revenue and profit projections through the end of 2024, citing challenging market conditions.
Chief executive Régis Schultz has guided for a pre-tax profit between £915 million and £935 million, along with full-year organic revenue growth of around 5%. However, the company faces headwinds that were more severe than anticipated, leading to a cautious outlook for the new financial year. Despite these challenges, markets are forecasting a revenue growth of about 10%, reaching approximately £12.6 billion this year, bolstered by new store openings and the recent acquisitions of Hibbett in North America and Courir in France.
Looking ahead, JD Sports is set to outline its strategic plans for 2026 and beyond in its upcoming Q4 trading statement. The company is under pressure to adapt its medium-term strategy following a string of weak trading in 2024 and the complexities introduced by its recent acquisitions. As the UK market braces for changes to National Insurance and minimum wage laws, JD Sports' management has expressed concerns that these factors could further elevate operational costs.
In the larger context of the retail market, Tesco is also in the spotlight, scheduled to report its full-year results on April 10, 2025. Analysts expect Tesco to report a slight increase in underlying operating profits, slightly ahead of the group's £2.9 billion guidance, as it capitalizes on a 3.1% rise in like-for-like retail sales during the Christmas season. The competitive landscape remains fierce, but Tesco's strategy of enhancing its value offerings and expanding its product range aims to attract cost-conscious customers.
As JD Sports prepares for its upcoming trading update, the focus will be on how the company navigates these turbulent waters amidst external pressures from tariffs and internal challenges from changing market dynamics. Investors are eager to see if JD Sports can maintain its pricing strategy while also addressing the potential impact of rising operational costs and a competitive retail environment.
The implications of Trump's tariff announcement extend beyond JD Sports, affecting the broader European sportswear market. As companies like Nike and Adidas grapple with falling stock prices and potential revenue losses, the entire sector faces a critical juncture. The upcoming trading updates from JD Sports and Tesco will be pivotal in shaping market sentiment as investors seek to gauge the resilience of these retail giants in an increasingly challenging landscape.
With the retail sector in flux, JD Sports' ability to adapt and respond to these challenges will be crucial. The company's upcoming Q4 trading statement is expected to provide insights into its strategic direction and financial health as it aims to reassure investors amid a backdrop of uncertainty.
