JD Sports Shares Edged Lower on the CMA Penalty. What’s Next?

Key points:
JD Sports shares edged lower after the CMA fined its £1.485 million.
The sportswear retailer was fined for conspiring to fix prices with a rival.
However, JD Sports’ business is resilient despite the sharp decline.

The JD Sports Fashion PLC (LON: JD) share price edged 3.13% lower after announcing that the UK’s Competition and Markets Authority (CMA) had fined it £1.485 million ($1.604 million) for breaches of competition law.

The sportswear retailer noted that the CMA had applied a significant discount in determining the penalty since the company had cooperated fully with the CMA’s investigation, including taking swift steps to request leniency and agreeing to settle the investigation.

Also read: A Guide To The Best Clothing Stocks To Buy.

The lack of movement in JD Sports’ share price could have been driven by the company’s move to set aside approximately £2 million to settle any penalties arising from the CMA’s investigation on 7 June 2022.

JD Sports was found guilty of colluding with its competitor, Elite Sports, to fix the retail prices of specific Rangers-branded replica kits and other clothing items. Price fixing and collusion to extort consumers are severe crimes under UK competition laws.

The company’s shares have fallen 53.89% this year amid worries that consumers will stop spending money on sportswear items as their incomes are squeezed further. However, the latest earnings results showed that its sales grew 14% in H1 2022.

Investors ignored JD Sports’ earnings results, which were significant given that the sportswear retailer had its best year in 2021. Therefore, this year’s revenues outpacing last year’s shows that the company’s business remains resilient.

However, JD Sports shareholders are worried that the newly appointed CEO, Regis Schultz, was appointed in August after the May ouster of former CEO Peter Cowgill, who had been in his role since 2014 and had transformed the company into the market leader it is today.

Régis Schultz has his work cut out for him as he steers the company into uncharted territory as the UK and global economies face a looming recession due to central bank rate hikes.

JD Sports shares are trading near lows last seen in May 2020. I would wait for a trend reversal before buying.

*This is not investment advice.

JD Sports share price.