Market Analysis: JD Sportwear, Imperial Brands

JD Sports: Greater Margin Volatility from Nike's Struggles as OtherBrands Gain Shelf Space; Challenges in Translating UK Success toInternational Markets. Imperial Brands: Struggle to build strong brands in NGP market; Regulator challenges in increasing taxes and flavour restrictions

In the footwear and apparel space, Yanmei Tang, Analyst at Third Bridge makes a series of remarks regarding JD Sports, informed by insights from industry experts:

“Nike's recent struggles are creating uncertainty for JD Sports. Our experts say JD relies on Nike's strength since its products typically have higher price tags than other brands, helping boost profits.”

“More margin volatility is inevitable as other brands gain more shelf space in stores. These brands usually have shorter product life cycles, leading to increased promotional activity.”

“JD Sports faces less margin volatility in the UK due to higher apparel sales. In Europe and the US, where apparel is a smaller share of the mix, volatility increases. To counter this, JD is pushing more apparel, especially in the US, to balance out footwear fluctuations.”

“JD Sports is finding it tough to translate its UK success to international markets. It’s grappling with site availability in Italy, affordability issues in Eastern Europe, and tricky market conditions in the US.”

Orwa Mohamad, Analyst at Third Bridge comments on Imperial Brands:
"Imperial Brands is finding it tough to stand out in the Next-Generation Products (NGP) market. Experts say the company struggles to build strong brands, which is critical for long-term success. Unlike PMI, which dominates the premium segment, Imperial has boxed itself into a smaller, price-driven market aimed at value-conscious consumers. This reliance on outdated tobacco strategies and price competition limits its ability to grow and compete effectively.

"The biggest regulatory challenges for NGPs are increasing taxes and flavour restrictions. Governments are raising taxes on NGPs to recover lost excise revenues as consumers shift from traditional cigarettes. Flavour bans, limiting options to tobacco flavours, aim to prevent underage use and reinforce NGPs as cigarette substitutes.

"Imperial Brands' reliance on Chinese manufacturers for NGPs reflects its lack of R&D capabilities and urgency to launch products quickly. This shortcut approach leaves Imperial at a disadvantage compared to PMI and BAT, which have invested heavily in building R&D and securing competitive advantages.

"Experts are sceptical about Imperial Brands' ability to gain significant market share in nicotine pouches. They predict the company will only achieve a small, single-digit market share in countries where it already has some strength, like the US, UK, Spain, and Germany."