The Investment Column: Sportswear boom could be over
Thursday 26 March 1998
But clouds have begun to gather on the horizon just as things should have been looking sunny in the run-up to the World Cup. Nike issued a profits warning last week and though the problems are mostly in the US and the Far East, over-supply is causing in price cutting everywhere. This is bound to have a knock-on effect on UK retailers, who are pawns in a much more powerful game.
Demand here does seem to have faltered. Sports Division, the privately owned retailer, is delaying its decision on the timing of its float and share prices have been falling. JJB shares have lost 18 per cent of their value since their peak just three weeks ago. On top of all this, the former merchandise director of Manchester United has said the replica sales boom may be over.
With the huge store opening programmes being undertaken, the market is clearly more difficult. The question now is whether this is just a dip or the beginning of the end of this particular fashion.
The next news will be JJB Sports' full-year results next month. With analysts expecting profits of pounds 34.5m the shares trade on a forward rating of 20 times. This is far higher than Blacks Leisure, which has a wider spread of interests, and JD Sports, which has been affected by profits warnings. The World Cup may provide a boost but, with higher interest rates affecting consumer spending and the threat of a shift in fashions, investors should proceed with caution. There is a case for locking in profits.
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