JD Sports Shares (LON: JD) Gap Down Amid Nike Performance Worries

Retailer JD Sports Fashion share price (LON: JD) saw a drop after Barclays analysts expressed concerns regarding its major supplier, Nike Inc. (NYSE: NKE). The stock gapped down on open this morning, and now trades 2.68% down on the day as recent bearish sentiment continues.

This reaction followed a downgrade by Barclays from ‘Equal Weight' to ‘Underweight', signalling a more cautious stance on the stock's short-term prospects. Over the past month of trading, JD.L shares have dropped almost 15% as the firm struggles to shift the bears.

The downgrade by the analysts stems from recent developments with Nike, a key brand for JD Sports, which acknowledged through its most recent outlook that it expects a mid-single-digit percentage decline in its annual sales.

This projection came on the heels of Nike reporting fourth-quarter revenue figures at $12.61 billion, which failed to meet the anticipated $12.84 billion expected by analysts. The result marked a 1.7% decrease from the same period last year.

JD Sports, which has a considerable exposure to Nike's performance due to the brand comprising roughly half of their revenue, felt the ripple effects on the market. The news of Nike's underperformance has created uncertainty around future expectations for JD's sales figures. This is especially alarming for investors given that Nike's stock price has taken a substantial hit, shedding over 25% of its value year-to-date.

Nike's stumbles come as the company faces increasing challenges from emergent brands such as Deckers Outdoor Corporation's Hoka and the Swiss brand On, which have been eating into its market share. Additionally, Nike's drive to amplify direct-to-consumer sales in North America has yet to produce the desired impact, further obstructing its growth trajectory.

According to data from London Stock Exchange Group (LSEG) noted by Reuters, analysts had previously estimated an uplift of 0.91% in Nike's sales, which puts the actual results into sharper contrast. This downward revision and Nike's shortcomings pose potential challenges for JD Sports, which must now navigate a market where its primary supplier is showing signs of weakening demand.

For the time being, the jitters felt on the trading floor reflect the broader apprehensions of stakeholders in a retail landscape that continues to be unpredictable and highly competitive.