RBC warns on German consumer weakness, cuts H&M and JD Sports forecasts

RBC warns on German consumer weakness, cuts H&M and JD Sports forecasts

Tue, August 25, 2026 at 3:30 PM GMT+3 2 min read

RBC Capital Markets has flagged sluggish consumer demand in Germany as a growing risk for European retailers, cutting profit forecasts for both H&M and JD Sports Fashion PLC (LSE:JD., OTC:JDSPY).

Germany's higher cost of living is weighing on consumption, with shoppers remaining selective and deal-driven, RBC said.

The bank cut its earnings per share forecasts for H&M, the Swedish fashion retailer, by 2% to 3% for the 2026 and 2027 financial years, citing lower like-for-like sales assumptions and higher operating costs.

RBC lowered its price target for H&M to SEK175 from an unspecified previous level, maintaining a "sector perform" rating.

JD Sports, the British sportswear retailer, fared worse. RBC cut its earnings forecasts for the 2027 and 2028 financial years by 6%, reducing its price target to 95 pence from 100 pence.

The retailer reported softer-than-expected second-quarter trading last week, driven by slower US footwear sales, RBC said.

Store sales in German fashion retail have fallen almost 4% year to date, while online sales have risen 4% year on year, RBC found, a trend it expects to continue given Germany's e-commerce penetration lags other major markets.

RBC said Next, the British clothing retailer, and Zalando, the German online fashion platform, are best placed to benefit from the online shift, while Action and H&M carry more exposure to German stores.

Primark's owner, Associated British Foods PLC (LSE:ABF), needs to localise its offering in Germany given its lack of online presence there, RBC said.

JD Sports plans to close about 40% of its roughly 100 German stores as parts of the German market appear to favour single-brand retailers over multi-brand stores, according to RBC.