Investors who pick the right FTSE 100 share can make a fortune. While the index is best known for its established dividend-paying blue-chips, it contains some terrific growth stocks too. One of the most impressive is leisure and sportswear retailer JD Sports Fashion (LSE: JD).
I’ve just dug out an article I wrote on the company in September 2019, shortly after its breakneck share price growth had propelled it into the FTSE 100.
A sporty little stock
I was full of praise for its success writing: “The group may call itself the ‘undisputed king of trainers’ but Millennials and Gen Z customers can’t get enough of its T-shirts, hoodies, tracksuits and other athleisure.”
I also warned that with a much larger market-cap of £6.6bn the growth had to slow. So it’s proved. Almost four years later, JD Sports’ market-cap is just 15% higher at £7.61bn.
Long-term investors in JD Sports have a lot to celebrate. Over the last 20 years, its shares have delivered a total return of 12,739%, according to calculations by AJ Bell. That’s second only to US-focused equipment rental specialist Ashtead Group.
If I ‘d invested £8,000 at the start of that blistering run, I’d have an incredible £1.027m today. So much for hindsight. All that matters now is whether I should buy JD Sports today.
Its shares are still beating the FTSE 100 but by a much smaller margin. They’re up 11.1% over the last 12 months, against just 0.82% for the index. Over the last six months, they’ve fallen 20%. I think this might be my opportunity to buy them.
JD Sports fell after management warned in June that its North American markets were “softening”. Yet news elsewhere was better, with full-year profit still on course to top £1bn as its UK, Europe and Asia Pacific operations held up.
I feel it was oversold and looks cheap, trading at a forecast valuation of just 11.1 times 2024 earnings. Better still, its sales are expected to carry on climbing. In 2023, revenues totalled £10.13bn. Analysts forecast they will hit £10.83bn in 2024 and £11.96bn in 2025. Forecasts are never set in stone, but it does point to a more promising outlook.
I think it’s still a buy
The group continues to explore new markets, signing its first ever Middle East franchise last month, and buying control of Iberian Sports Retail for €500m. It’s also working on the €520m purchase of French retailer Courir.
Fashion is a notably risky area, as investors in ASOS and Boohoo will testify. JD Sports has done brilliantly, but can’t rest for a moment. It remains at the mercy of huge international brands like Nike and Adidas, and would take a big hit if they focused on selling their wares direct instead.
With a low forecast yield of just 0.55% the company has to keep growing to keep investors’ interest. Any slips will be punished.
I thought I’d missed my chance with JD Sports. Now I’m keen to buy when I have the cash, especially if the economy flatlines and its share price dips. I don’t expect to make a million though. That ship sailed 20 years ago.
