JD Sports boss warns of price rises as shoe makers resist Trump’s tariffs
The chairman of FTSE 100 giant JD Sports has said prices will rise if President Donald Trump’s tariffs stay at their current levels.
Speaking on the Today programme, chairman Andrew Higginson, who also chairs the British Retail Consortium (BRC), added that it’s unlikely shoe production will shift to the US and lambasted the uncertainty caused by Trump’s tariff war.
The retailer’s share price has slumped nearly 11 per cent since April 2 as investors fear the effect of tariffs on its Asia-made goods.
Higginson said it was “unlikely” shoe production will move to the US but that it “depends on how high the tariffs are and for how long”.
JD Sports is heavily reliant on a global network of manufacturers via brand partners, including tariff-hit Vietnam – where manufacturing accounts for around a quarter of GDP – as well as China and Cambodia.
Nike, which is JD Sports’ number one partner worldwide, similarly makes its shoes in Asia.
The company, which was already struggling with low sales before the tariffs were announced, has seen its share price drop 18 per cent since ‘Liberation Day’.
“It will take a lot to overturn the economics of a country that has invested heavily behind these things,” Higginson said.
“It’s an illusion that this is just about cheap labour… these countries have invested a huge amount in the technology and the manufacturing capabilities it goes into making a number of these products,” he added.
JD Sports’ share price has particularly suffered because it has pushed a rapid expansion into the US, with around 40 per cent of sales in the country as of August last year.
“What I think the likely result is that things will just be more expensive if these tariffs stay at these highs,” Higginson continued.
Analysts have warned consumers are unlikely to be able to stomach these price increases, and noted the likelihood of knock-on inflation in the UK and Europe despite the UK’s comparatively low tariff of 10 per cent.
“Sales could falter while any potential benefit from a lower tariff regime versus other trading partners would be much slower to materialise,” Rob Morgan, chief investment analyst at Charles Stanley, said.
Despite the uncertainty, Higginson remained upbeat: “I think we’re running good businesses that are well founded on strong customer demand, and over time, whatever adjustments will have to be made with supply chains and so on will work their way through and we’ll still have a good business at the end of it.”
Quarterly update calms JD investors
Despite concerns about the effects of Trump’s trade war, JD Sport’s quarterly update proved a welcome balm.
The company told markets that revenue growth was 0.3 per cent in the fourth quarter, with organic revenue growth of 5.6 per cent, driven by a strong performance in Europe.
JD posted organic revenue growth of 5.8 per cent for the full year, which was slightly ahead of previous guidance and driven by strong growth in North America, Europe and Asia Pacific.
Its share price rose by just under nine per cent at Wednesday after the announcement.
“JD Sports investors breathed a sigh of relief as full-year organic sales growth landed in line with market expectations,” Aarin Chiekrie, equity analyst, Hargreaves Lansdown said.
“A string of weak sales and profit downgrades in recent times means that simply meeting expectations is viewed as a win,” Chiekrie added.
Panmure Liberum analysts rated JD a ‘Hold’.
“While the valuation remains undemanding, significant risks revolve around the US business and we require more evidence of stabilised trading within the core UK business,” analyst Anubhav Malhotra said.
JD said it expected trade to be “volatile” in the short term.
“We note the proposed changes to tariffs announced last week. At this stage, the outcome of these developments is uncertain.
“We are in regular dialogue with our brand partners but it is too early to comment on the potential sector impact,” the company said.