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 sports‑fashion market remained difficult and heavily promotional, particularly in JD's core regions. RBC Capital said JD remained a well‑managed and strongly cash‑generative 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 year‑to‑date rerating in the shares.

In the US, which accounts for about 38% of JD's sales, RBC expects the current K‑shaped consumer pattern to persist, with lower‑income shoppers still sensitive to cost‑of‑living 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 self‑help 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 mono‑brand 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