Shares in John David Group plunged 15 per cent yesterday after the UK retailer that runs JD Sports issued its third profit warning in eight months.
The company, which more than doubled in size when it acquired the First Sport and Active Venture chains from Blacks Leisure last year for £52m, cautioned that this year's profits were likely to be "significantly below" market expectations. The warning came in a trading update before this morning's annual shareholder meeting.
The group, which revealed in May that it was axing the downmarket First Sport brand, said a programme to convert the 209-strong chain into JD Sports or Athleisure formats was proving more time consuming than anticipated. "Continuing disruption [has] affected performance in many stores," it added.
Pointing to First Sport as the culprit for its troubles, the company said like-for-like sales had fallen 6 per cent across the division in the six months to 31 July, while like-for-like sales at JD Sports were down by 0.5 per cent. Across the group, the shortfall was 3 per cent. Its shares, which traded at 262.5p in January, fell 27p to 150.5p.
Roger Best, who was appointed chairman in May, said it would take at least 18 months before the benefits from an attempt to realign its store portfolio filtered through. Going forward, the group will focus on two divisions - 333 stores focused on sports fashion and 47 selling "casual leisurewear", he said.
Analysts reacted by more than halving their forecasts. Rhys Williams, at Seymour Pearce, cut his profit estimate for this year to £9m from £18.5m and for next year to £18.5m from £23.5m. Numis Securities is also looking for just £9m this year. "Since this is the third profits warning in eight months following a poorer than anticipated Christmas last year, no one is going to believe the recovery story until it starts to come through," Mr Williams said.
Mr Best said that although the company's operating performance was expected to improve in the second half, it would not offset the shortfall seen at the beginning of the year. In May, the group reported its first profits fall since its flotation.
The company said it had converted 102 First Sport stores to the JD Sports banner. It has sold 15 loss-making First Sport outlets and plans to offload a further 18 in the second half of its year.