MARKET REPORT: JD Sports was shocked when Nike issues a sales warning

Sports retailer investors were spooked after Nike cut its sales forecasts and outlined plans to cut costs.

Shares in JD Sports – the self-styled 'King of Trainers' – fell 5.2 per cent, or 8.95 cents, to 165 cents, and Frasers Group, owner of Sports Direct, Jack Wills and Flannels, fell 0.7 per cent, or 6, 5 cents, to 922.5 cents.

JD Sports and Frasers Group are both heavily dependent on Nike sales, with some sneakers fetching as much as £120 per pair.

Checked off: Nike reported that weaker demand in China, Europe, the Middle East and Africa had affected sales

The sell-off came after Nike reported late last night that weaker demand in China, Europe, the Middle East and Africa had affected sales.

While sales rose slightly in the second quarter, the retailer warned that revenues are likely to be “softer” over the next six months. As a result, Nike cut its full-year sales forecast and warned it wanted to save up to £1.6 billion over the next three years.

But efforts to streamline operations are expected to result in a charge of up to £354 million this quarter.

Nike shares initially fell almost 11 percent on Wall Street, while American peer Dick's Sporting Goods lost 3.2 percent and Foot Locker lost almost 6 percent.

Victoria Scholar, head of investments at Interactive Investor, said: 'Nike has struggled amid the weak consumer environment, heavy promotions and discounts, sluggish online sales and a slowdown in demand from the world's second-largest economy, China.

“Sports retailers have also been more cautious with their stock purchases, which is negatively impacting Nike's wholesale business.

“While the U.S. economy has proven more resilient than expected so far, there are concerns about a slowdown in 2024 that could hurt Nike.” In the last trading session before Christmas, the FTSE 100 rose 0.04 percent, or 2.78 points, to 7697.51 and the FTSE 250 gained 0.3 percent, or 59.98 points, to 19630.95.

In Asia, billions were wiped off Chinese internet stocks overnight after the country's regulator vowed to tighten measures against gaming addiction in a set of recently released draft guidelines.

Concerns about the impact on profits led to a sell-off as Tencent, owner of messaging app WeChat, suffered its biggest intraday decline since 2008.

Back in London, Harbor Energy marched forward a day later it signed a deal worth almost £9 billion to buy the non-Russian assets of German firm Wintershall Dea.

With the largest North Sea oil and gas producer on course to become a major global player, investment bank Stifel has raised its target price from 480 to 570p.

Shares rose 5.8 percent, or 17.2p, to 312.7p.

Fellow North Sea producer Enquest has sold its 15 percent stake in an oilfield and another asset for £46 million. Shares rose 8.1 percent, or 1.15p, to 15.38p.

M&C Saatchi has scaled back its advertising division to streamline its operations.

The company agreed to sell its Hong Kong arm and reduce its stake in its Swedish unit from 70 percent to 30 percent. Shares rose 1.6 percent, or 2.5p, to 160p.

Octopus Renewables Infrastructure Trust will find out next month whether its third approach to merge with a fellow green energy investor has been accepted.

It wants to join forces with Aquila European Renewables to become one of the largest sustainable funds in the sector.

Aquila said it will consider the proposal along with other options early this new year.

Analysts at Stifel said the deal “could make a lot of sense,” but questioned why Octopus would make an announcement on the last day before Christmas and go public about “soft discussions.” Shares in Octopus rose 0.2 percent, or 0.3p, to 89.8p. Aquila gained 5.5 percent, or 3.5 cents, to 67.75 cents.

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