JD Sports has recorded a near 20% year-on-year drop in its profit before tax, totalling £294m, as cost-of-living pressures hit its consumers.

The sports fashion retailer said its performance in the 26 weeks to 1 August was resilient against a challenging backdrop, as its sales dropped by 0.8% to £5.89bn.

However, its online sales increased as a proportion of group sales to 20%, with organic online sales rising by 5.2% year-on-year, supported by continued investment in omni-channel ranging, fulfilment and technology platforms.

Its operating profit also dropped by 20.5% to £294m.

In its JD Brand First strategy, JD Sports said it has continued execution against store productivity and optimisation strategy globally, remaining on track to convert or close all remaining standalone Finish Line stores by the end of FY28.

The latest results come the retailer announced that it had signed a new franchise agreement in Mexico.

JD Sports CEO, Régis Schultz, said: "Our group organic sales were -0.7% for the half, a resilient performance against a challenging backdrop of consumer cost-of-living pressures, footwear product cycle headwinds and a highly promotional market. We remained focused on ‘controlling the controllables’ – progressing our strategy at pace while maintaining tight cost and capital discipline.

“We achieved several strategic milestones in the period. We continued to broaden our product proposition, with apparel and accessories growing to 36% of Group sales, alongside strong momentum in performance-based running and newer footwear styles. New e-commerce platforms went live in the UK and Ireland, and online sales grew to 20% of Group sales."

In its outlook, JD Sports said its profit before tax and free flow guidance remains unchanged from its Q2 trading statement.

As a result, its profit before tax guidance remains between £700m and £800m, with its free cash flow expected to be between £460m and £520m.

Following the update, shares in JD Sports dropped by around 3.2%.

Head of markets at AJ Bell, Dan Coatsworth, said the firm’s "woes are not a surprise", following the consumer backdrop.

He concluded: "While business is tough now, it might not always be this way. JD has its eyes on the future, hence why it has strengthened e-commerce capabilities, reorganised part of its store portfolio, and embraced AI to help capture new ways of using the technology to research and buy goods. Geographic expansion into Mexico via a franchise partnership also shows a forward-thinking mindset.

"The challenge for the business now is to ensure that sales don’t majorly go into reverse, and that it continues to give customers a reason to visit its stores and websites. The outlook is uncertain given current inflation pressures and interest rates looking like they could stay higher for longer.

"Investors should take solace in the fact JD has not found reason to lower its forward guidance. Maintaining profit and cash flow guidance is a positive sign when a company is in a tricky position like JD, but investors only have so much patience. They will want to see progress sooner rather than later."

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