RBC lowers JD Sports to 'sector perform'

(Sharecast News) - Analysts at RBC Capital Markets downgraded JD Sports to 'sector perform' from 'outperform' on Monday as they warned that conditions across the sportsfashion market remained difficult and heavily promotional, particularly in JD's core regions.

RBC Capital said JD remained a wellmanaged and strongly cashgenerative business, but argued that weaker brand momentum in the mass market and pressure on its younger customer base justified a more cautious stance after a yeartodate rerating in the shares.

In the US, which accounts for about 38% of JD's sales, RBC expects the current Kshaped consumer pattern to persist, with lowerincome shoppers still sensitive to costofliving pressures such as higher fuel prices. It also flagged tougher comparatives and a lack of "brand heat" for major footwear labels, including Nike.

In Europe, around 34% of sales, JD's selfhelp programme was said to be on track, with improvements in automation, replenishment speeds and distribution costs. Challenges remain in Germany, where parts of the market favour monobrand retailing, and some store consolidation was expected.

The UK, which makes up roughly 25% of sales, was described as mature but highly promotional, with excess inventory across big brands and JD's younger cohort exposed to employment pressures and cumulative inflation.

The Canadian bank, which reiterated its 100p target price on JD, trimmed its forecasts for the stock, with FY27 pre-tax profit expectations reduced by 2% and FY28 set 4% below consensus.

RBC added that while valuation remains low at around 8x CY27 earnings and buybacks continue to support earnings per share, it thinks industry conditions will take time to improve.

Reporting by Iain Gilbert at Sharecast.com