JD Sports (LSE: JD) shares fell more than any other FTSE 100 stock over the last month. The drop was so sharp that the sportswear retailer fell nearly three times the second biggest faller.
The sell-off followed a 4 January update. Investors didn’t like the firm downgrading the £1.02bn earnings forecast for the fiscal year to £915-£935m. The news sparked something of a selling frenzy.
Experienced investors might smell an opportunity. Interest rates and inflation seem to be hurting retail and we might be near a good time to pick up underpriced shares given the scale of the drop.
JD Sports shares sat at 173p a month ago before falling 37.1% to 108p, as I write. To put this fall into perspective, the Footsie’s second biggest loser, Burberry, dropped just 13%.
Tough month
If I’d bought £1,495 of JD shares a month ago, I’d have been kicking myself in short order. Within days, my shares would have nosedived. I’d have a round £1,000 up to the present day. Ouch!
Is the panic overblown? A few seem to think so. Last week, JD Sports rose to the top of Hargreaves Lansdown‘s ‘Top of the Stocks’ list. It was the platform’s most bought stock by investors making up 2.42% of all buy trades.
I must say I’ve admired the stock from afar. A 5,980% increase in share price since 2008 is about as good as it gets. And this 60 times return doesn’t surprise me given how I can’t walk through a town centre without seeing a JD Sports store (or two!)
The company has benefitted from the athleisure trend. It seems hard to ignore this shift. At least, I never used to see people wearing jogging bottoms to restaurants. Now I see it every time I go out.
A passing craze?
Is athleisure a passing craze? The downgraded forecast might be people buying different – or cheaper – clothes. This could devastate the business and is one of the risks of any ‘fashion’ stock. If I want to see what happens when trends change, I only need to look at Superdry stock – down 99%.
Competitor Frasers Group, which owns Sports Direct, is down 15% over the last month. US sports giant Nike is down 17% too. While I don’t want to say the writing is on the wall here, the sector looks risky.
Early last year, CEO Régis Schultz was bullish about the cost-of-living crisis, saying young shoppers were still coming into JD’s stores for an “affordable luxury treat”. Well, that might not be so much the case anymore. I think I’ll be staying out of this one.
