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(Sharecast News) - Adidas and JD Sports tumbled on Tuesday after Bank of America downgraded its stance on the sportswear retailers, saying it expects a "material stepdown" in the sector's growth.
The bank cut Adidas to 'underperform' from 'buy' and slashed the price target to 160 from 213. JD Sports was downgraded to 'neutral' from 'buy' and the price target cut to 96p from 112p.
Analysts at the bank said the 20-year "casualisation trend" was largely complete.
As far as Adidas is concerned, BoA said the sports performance segment offers no relief as sport participation, in the US at least, is not increasing. It also pointed to the fact that Nike and Adidas are not expanding their retail exposure as a share of revenue and said this removes the technical boost of moving sales from wholesale to retail.
Bank of America said JD Sports' cost structure is largely fixed so revenue weakness creates a margin risk. It also noted that the third-quarter trading statement indicated no pre-tax profit rise in FY27. This points to further consensus earnings per share downgrades, it said.
At 1110 GMT, JD Sports shares were down 5.5% at 82.63p, while Adidas was 7% weaker at 158.05.
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