JD Sports Fashion (LSE:JD) stock plummeted on Thursday morning. At one stage, the stock was down 9%.
The shares have been on a downward track over the past 12 months, falling from a high of 235p a share, to 98p in May. Today, they’re trading for 101p.
What’s behind today’s fall?
Retailers were among the biggest fallers on the FTSE on Thursday morning. JD Sports fell as ASOS and Boohoo made concerning announcements.
Online clothing giant ASOS issued a profit warning on Thursday. The firm said that profits will be between £20m and £60m, far below previous guidance of £110m to £140m. The group’s share price tanked as a result.
ASOS warned that inflation and supply chain problems were hitting sales. Sales rose only 4% in the first quarter.
Meanwhile, Boohoo said the sales growth it saw during the pandemic had not been sustained. The group said that sales in the last three months are down 8% to £446 million.
The announcement has worried investors and dented their confidence in the UK’s retail sector.
JD Sports’ falling share price
The stock has largely fallen on the back of inflationary pressure and poor economic forecasts.
In June, the shares tanked after UK’s competition watchdog provisionally found that the country’s biggest sportswear retailer had been involved in price fixing.
The watchdog also found that Elite Sports and Rangers Football Club had been involved in the practice. The investigation concerned the fixing of retail prices of certain Rangers-branded clothing products.
However, this event isn’t responsible for the overall downward pressure on the share price. It’s more about customer confidence amid a cost of living crisis and poor economic forecasts.
Is JD Sports a bargain at today’s price?
It’s hard to tell what’s going to happen later this year. There’s definitely some concern about a recession, and that won’t help JD Sports.
However, the management team has recently raised guidance for a third time in the year-to-date. Berenberg described JD Sports’ management team as “typically cautious“.
“These fears look overdone, creating a compelling buying opportunity,” Berenberg analysts said in a statement in May.
JD Sports also looks pretty cheap according to some metrics. It has a price-to-sales ratio of around 0.8, having achieved over £6bn in revenue last year.
The firm is expecting to make around £900m in profit this year and £940m in 2023.
It has a good record of growing its revenue, but there are clearly concerns that an exceptionally difficult retail environment might put a halt to this.
At the current price, I think JD Sports looks like a good long-term buy for my portfolio. In fact, I’m looking at adding it to my portfolio.
However, I wouldn’t be surprised if the share price suffers later in the year depending on the macroeconomic environment.
