Life could get a lot tougher for JD Sports given the significant headwinds facing retailers. With interest rates set to keep going up for the foreseeable future and consumers starting to feel less confident about job security given the dark clouds over the economy, JD is going to need some highly desirable products on its shelves or its second-half results won’t be a patch on the first-half.
AJ Bell investment director, Russ Mould, said: “A reduction in consumer spending combined with the potential for more supply chain disruptions could add up to a nasty cocktail, and one that could give Régis Schultz serious challenges in his first months as the new chief executive.
“The key thing to watch is unemployment levels. JD sells a lot of goods to young adults, many of whom work in the leisure and retail sectors, areas which could be susceptible to job cuts if the economy goes into a serious downturn.
“Interestingly, JD appears to be keeping its eye on the longer-term opportunity rather than retrenching because of the near-term headwinds. It is investing in stores to make them look smarter, thereby strengthening its appeal to shoppers who want to own the latest must-have trainers and be seen to shop in the best-looking places.
“This should serve the company well in the long term as many of its rivals are likely to be fretting about the current conditions and risk losing market share if they get scared. But JD still needs to be prepared for a tough period in the coming months and continue to keep an eye on the money coming in and going out.”