Organic growth of 2.7 per cent might not quicken the pulse of investors in JD Sports LON:JD.. Yet in the current retail climate — marked by squeezed household budgets and fickle footwear cycles — it counts as endurance rather than speed. The sportswear retailer is running a marathon, not a sprint.
JD’s £5.9bn of sales in the six months to August 2 were up a muscular 20 per cent at constant exchange rates, though that headline was inflated by its recent purchases of Hibbett in the US and Courir in France. Strip those out and the pace is more pedestrian. Like-for-like sales fell 2.5 per cent, with footwear dragging down what was otherwise a resilient showing in apparel.
The structural problem is that JD is hostage to the rhythms of sneaker product cycles. Popular franchises fade. Fresh ones take time to build. In the meantime, inventories bulge and margins sag. Gross margin slipped 60 basis points to 48 per cent. Some of that was self-inflicted, as JD cut prices online to remain competitive.
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Still, there are areas where the company shows stamina. North America, now 39 per cent of group sales, is finally living up to years of investor hype. JD is gaining market share, opening flagships from Las Vegas to Vancouver and integrating City Gear into its DTLR and Shoe Palace fascias. Courir, meanwhile, gives the group a credible female-focused format in Europe. Together, these deals expand JD’s geographic and demographic footprint — and flatter top-line growth.
“The investment case remains anchored on JD’s global scale, proven brand model, and ability to deliver returns to shareholders, provided trading conditions gradually improve,” said analyst Adam Vettese at eToro. “Shares are not far off half of what they were 12 months ago, and such a heavy discount may tempt some investors to back the turnaround.”
Investors should be more interested in the plumbing than the shop windows. Supply chain investment has long been JD’s Achilles’ heel. That weakness is now being addressed. New automated distribution centres in California, the Netherlands and Australia promise faster replenishment and lower costs. If executed smoothly, these should provide the leverage that acquisitions alone cannot.
JD Sports’ cash generation remains robust
JD produced £546m of operating cash flow after lease repayments in the half, up 5 per cent year on year. Net debt before leases stands at just £125m, and management expects a net cash position by year-end. That financial strength underpins the interim dividend of 0.33p and a fresh £100m buyback, the second this year. The board is signalling confidence, or at least a lack of better uses for capital.
The question is whether JD can convert operational improvements into sustainable profit growth. First-half profit before tax and adjusting items came in at £351m, in line with guidance. Full-year expectations are unchanged. But consensus forecasts for FY26 assume a recovery in like-for-like sales, which remains to be proved.
External threats abound
US tariffs are a live risk, though JD downplays their impact — less than 10 per cent of direct sales are exposed, and brand partners are diversifying sourcing. More pressing is the consumer backdrop. Elevated unemployment risk, weaker disposable incomes and cautious brand partners all point to a tougher trading environment in the second half.
“Our experts warn that brands such as Nike and Adidas could look to offset tariff-related pressures by tightening wholesale pricing terms,” notes analyst Yanmei Tang at research house Third Bridge. “Since most branded products are sourced from Southeast Asia and exposed to US tariffs, there is a possibility that suppliers push through higher costs. With Dick’s and Foot Locker combining forces, JD’s relative leverage in negotiations may weaken, leaving it vulnerable to margin compression.”
Investors may take comfort in JD’s global scale — 4,872 stores across 36 countries, with nearly 9m loyalty members online. The group has built enviable relationships with Nike, Adidas and others, giving it access to exclusive ranges. And its multi-fascia model, spanning premium JD stores, community Hibbett outlets and urban-focused DTLR shops, offers resilience. But scale cuts both ways. Operational complexity is high, and integration of multiple acquisitions is no easy feat.
JD’s shares have rallied and slumped in rhythm with its transatlantic ambitions. The bull case is that once new footwear cycles kick in and supply chain savings flow through, margins and sales growth will accelerate. The bear case is that acquisitions mask sluggish organic performance, and the group risks becoming a serial consolidator rather than a disciplined retailer.
For now, JD looks more like a long-distance runner than a sprinter: steady, capable of weathering headwinds, but unlikely to dazzle in the near term. Investors will need stamina too.
