Okay, we are only a few days in. But 2024 so far has proved to be anything but a ‘Happy New Year’ for JD Sports Fashion (LSE:JD), or its share price.
Shares in the FTSE 100 retailer toppled on Thursday after it released a shock profit warning. Full-year earnings for the current financial year (to 3 February) are now tipped to fall year on year following disappointing sales and margin weakness.
I don‘t think now is the time to duck for cover though. I think JD‘s toppling share price represents a tantalising dip-buying opportunity.
Profits downgrade
In yesterday’s unscheduled update the retailer announced organic revenues growth of 6% during the 22 weeks to 30 December. This was lower than expected as milder weather from mid-September hit sales, while cautious consumer spending across the market encouraged greater promotional activity.
With margins also cooling, JD sliced its full-year estimates for pre-tax profit to between between £915m and £935m.
This would be lower than the £991.4m it recorded in fiscal 2023. The company had tipped full-year profit of £104.1bn as recently as late September.
A proven star
The self-proclaimed ‘King of Trainers‘ isn’t alone in reporting tough trading in recent months. In its largest single market of North America, other notable names including Foot Locker, Dick’s Sporting Goods and Nike have reporting underwhelming sales of late.
It’s possible that JD Sports and its peers could remain under pressure for a little longer too. Consumer spending in the US is cooling as the labour market also cools. Meanwhile, tough economic conditions persist in the FTSE company’s UK and Mainland Europe markets.
But as a long-term investor, I’m happy to endure a little more turbulence if the outlook further out remains attractive. And as Hargreaves Lansdown data shows below, JD Sports has an exceptional record of delivering long-term returns.
| Return over 10 years | 1,068% |
| Return over 20 years | 9,968% |
The sports retailer has delivered larger returns than any other current FTSE 100 stock during the past decade. And over the past 20 years it has put in the second-best performance behind rental equipment specialist Ashtead Group (a share I currently own).
A top FTSE 100 buy
I’m reminded of the famous sports maxim “form is temporary but class is permanent” when thinking about JD Sports shares today.
Earnings forecasts may come under further pressure in the months ahead, but the potential benefits of owning the retailer over a long time horizon still makes it a solid buy, in my book.
The athleisure market is widely predicted to continue growing steadily over the next decade at least. Allied Market Research analysts expect this end of the fashion market to attract revenues of $3.2bn by 2032. That’s up from $2bn last year.
And JD Sports is investing heavily in its online platform and store estate to capitalise on this opportunity. It’s on course to open 200 new stores in the current year alone.
Given its proven record of delivering awesome returns, I think JD Sports could be one of the best dip buys on the FTSE 100 right now.
