Shares in JD Sports Fashion (LON:JD) flashed green after the athleisure retailer announced its first move into the fast-growing Mexican market. The trainers-to-tracksuits seller has signed a long-term franchise partnership with Mexican retail distributor Grupo Axo to launch the JD brand in the populous North American nation.
JD Sports unveiled the tie-up with ‘Axo’ ahead of H1 results on 23 September. The Nike-to-New Balance brands seller needs to restore confidence in its growth story, having downgraded profit guidance last month.
Terms of the tie-up
Under the terms of the tie-up, Axo will operate JD stores and e-commerce in Mexico, using JD’s brand and intellectual property. Starting in 2027, Axo will operate more than 140 JD stores in Mexico, leveraging its existing retail estate of sneaker shops.
Forecasts for JD Sports Fashion
| H127E | H227E | FY27E | |
| Sales (£m) | 5,899 | 6,655 | 12,552 |
| Organic sales growth (%) | -0.7% | -0.7% | -0.5% |
| Pre-tax profit (£m) | 279 | 451 | 727 |
Source: JD Sports Fashion, company-compiled consensus
Over time, key locations will be upsized and reimagined in line with JD’s flagship ‘bigger and better’ format.
According to JD Sports, these store upgrades will create ‘some of the most compelling sports fashion destinations in and bringing an entirely new sports fashion destination to Mexican consumers’.
Runway for growth
Mexico’s demographics are highly attractive to JD Sports. With a massive population of over 130 million, around 40% of whom are under the age of 25, the market offers significant runway for growth.
Its activewear market is valued at roughly $6.5 billion and is expected to grow to over $10 billion by 2034, driven by key categories including running, football and lifestyle fashion. And according to Forbes, Mexico is also one of the world’s fastest-growing e-commerce markets.
What did the CEO say?
JD Sports CEO Regis Schultz said: ‘Bringing JD to this thriving market is an exciting milestone in our story. JD’s product offering aligns closely with consumer demand in Mexico and we believe our position at the intersection of sport, music and fashion will deepen the connection we have with that consumer.’
JD Sports Fashion already has a significant store footprint in the US, the world’s largest athleisure market.
Taking the JD brand to Mexico is the next logical step and the Axo agreement looks a savvy deal to us. It builds on the FTSE 100 retailer’s growing franchise platform across Europe, the Middle East, Africa and Asia.
Nevertheless, we would still avoid the shares for now given the potential for further earnings downgrades. In August, JD Sports slashed FY27 profit guidance. The trainers-to-tracksuits seller blamed weak consumer demand for the latest profit warning after seeing Q2 organic sales fall in North America, Europe and the UK.
Footwear markets remain soft with youthful shoppers feeling the pinch and struggling to find employment. Schultz is also on record as expecting muted market growth to persist in FY27. And promotional market conditions mean JD’s gross margins could come under further pressure.
