JD Sports
Sell a £100 pair of trainers and JD Sports makes about £5. Sales fell 0.7%. Profit fell by a fifth. JD carries the costs. Nike controls the demand.
ALL BREAKDOWNSTHE BREAKDOWNFEATURE
10/22/20265 min read
Sell a £100 pair of trainers and JD Sports makes about £5.
Sales fell 0.7%. Profit fell by a fifth.
JD carries the costs. Nike controls the demand.
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THE SETUP
JD Sports is Britain's biggest sports fashion retailer. It is one of the main places young people in the UK and America go to buy trainers.
In its latest half year it sold £5.9bn of goods, 0.7% less than a year earlier. Profit fell 19.7% to £282m.
A sales dip of less than 1% should be a rounding error. At JD it took a fifth off profit.
· More than 40% of JD's sales are Nike products. Footwear is about 60% of revenue.
· JD bought four American chains between 2018 and 2024 for about $2.46bn. North America is now its largest region.
· North American like for like sales (stores open over a year) fell 6.8% in the second quarter. In the UK, selling the same brands, they grew 0.8%.
Management blamed two things. Young customers are squeezed by the cost of living. And the product cycle has turned, with the best known shoes being wound down before the new ones arrive.
The biggest problem is what JD Sports now owns. It owns the stores, the leases, the staff and the brand, that tells us they stock the latest and best in trainer fashion.
But, it doesn’t own the shoe designs that bring customers through the door.
Call it rented demand. JD built a very large and very expensive machine for selling products that other companies design, make, market and ration. Nike is the biggest supplier by a distance.
The bigger the machine gets, the bigger the impact a poor year at Nike costs.
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THE PLAYBOOK
1. Supplier access
A JD store can be copied. Frasers, owner of Sports Direct, has spent years and a lot of money trying with its Elevation strategy.
Access can't be copied quickly. Nike and adidas don't want their best trainers in a bargain bin. JD gave them premium shops and a young customer who pays full price. In return it got bigger allocations and colourways nobody else could sell. A colour only JD has takes price out of the customer's decision.
Every part of that advantage is issued by the brands. Nike decides what gets designed and how many pairs each retailer receives. JD can't commission a new Air Max from its head office in Bury.
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Takeaway: Any advantage a supplier can take away is a licence. Boards should value it like one, with an expiry date.
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2. Four Banners
A sportswear chain from Bury used that access to go after the biggest trainer market in the world. It bought its way in.
Between 2018 and 2024 JD spent about $2.46bn on four American chains. The biggest was Hibbett, bought for about $1bn. It came with more than 1,150 stores in small Southern towns, America’s answer to the market town high street.
On paper it looked like spreading the risk. There were new names over the door and new parts of the country.
Inside, the shelves looked the same. They carried the same trainers from the same brands, and Nike was still more than 40% of sales. The model stayed the same. It just got bigger and moved to America, where JD now makes about 40% of its sales.
Then American sales turned. In the first half of this year North American operating profit fell by about a third, to £123m. Back home, UK like for like sales grew 0.8%.
The deals also hid the problem for a while. JD’s revenue grew 10.5% in FY26 and almost all of that came from the shops it had bought.
The shops it already owned sold 2.1% less.
If I were on that board, the first slide I’d want before any more deals is sales by supplier. Sales by country comes second.
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Takeaway: Before you buy a business to spread your risk, look at what’s on its shelves. If it’s the same stock as yours, you’ve added to the risk, not mitigated it.
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3. A thin margin
So where did £75m of operating profit go on a sales fall of only £41m? Think of it as two leaks. The figures are my estimates from JD's reported margins.
Leak one is selling less. On JD's normal margin, £41m of lost sales costs about £20m of gross profit.
Leak two is selling cheaper. Gross margin is the share of each sale left after paying for the stock. It fell from 48.0p to 46.8p in every pound. Across £5.9bn of sales, that 1.2p costs about £70m.
That is roughly £90m gone before a single cost is paid. JD trimmed about £15m from its other costs. The net result is a £75m fall in operating profit.
Discounting was the bigger leak. Most of the cost base couldn't move to meet it, because a store selling 3% less still pays the same rent and the same staff.
Operating margin fell from 6.2% to 5.0%. When a retailer keeps 5p from every pound, losing 1p is a fifth of its profit.
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Takeaway: At a 5% margin there is no such thing as a small sales miss. A board planning for a flat year in a business like this is planning for a profit warning.
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ONE MORE THING
Part of JD’s problem is Nike fixing its own issues.
Nike wants its most famous trainers to feel scarce again. So in FY26 it cut more than $2bn from those classic ranges.
The replacements aren’t ready yet. Nike’s boss, Elliott Hill, told investors that spring 2027 is when the new work starts to show. Until then, shops like JD are left selling off the old range. JD hasn’t said how much of its discounting was Nike, but it did name the product cycle as one reason profit fell.
The odd part is that Nike needs JD too. It spent years trying to sell direct through its own apps and stores and it didn’t work. Last year Nike’s direct sales fell 6%, while sales through shops like JD rose 6%. JD’s shares were around 233p at the end of 2021. They’re 84.5p now. Nike isn’t the only reason, but it’s the one JD can do least about.
The pressure has reached the boardroom. In April, Reuters reported that chair Andrew Higginson left after failing to get support to remove chief executive Régis Schultz, the man behind the Hibbett deal. Schultz denies it.
JD can lean harder on adidas, which grew 13% last year. It can push newer brands like On and Hoka, but between them they sell about $6bn a year, against Nike’s $46bn. Every step away from Nike puts the supply of its best trainers at risk.
Any business whose customers walk in for someone else’s product has the same problem. Amazon sellers live with it. So does an agency with one client paying half its bills.
JD’s next good year is being designed right now. In Nike’s head office in Oregon.
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THE PAPER TRAIL
JD Sports FY26 full-year results, May 2026
6 minute read
The cleanest starting point: £12.662 billion of sales.
https://www.jdplc.com/full-year-results-2025-26-fy26/
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Reuters: JD chair quit after reported attempt to remove Régis Schultz
3 minute read
The best record of the 2026 leadership tension. The strategy was being questioned internally before the extent of North American weakness became visible.
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