The JD Sports (LSE: JD.) share price has struggled recently. I’m wondering if now is an opportunity for me to buy more shares with a view to a turnaround, or should I just be happy with my current holding. Then there’s the wild card option, which is to sell my current shares based on recent performance, and the future outlook!
Here’s my view!
Falling shares amid tough conditions
Economic volatility seems to have really impacted the firm, and a profit warning in January confirmed investors’ worst fears.
The shares have dropped 40% in around two months, from 175p on 14 December 2023 to current levels of 104p. Over a 12-month period, they’re down 42% from 180p at this time last year to current levels.
Today’s investment case
Let’s start by dissecting January’s trading update for the 22 weeks to 30 December 2023. JD said that like-for-like growth came in at 1.8%, slightly less than the firm expected. Heavy spending on promotional activity due to the holiday season also impacted performance. Margins were also tighter, compared to the same period last year. Finally, JD confirmed profit would be less than previously anticipated when full year results are due later in the year.
I can understand why the JD Sports share price reacted the way it did, to be honest. There are still significant challenges for the business to overcome, at least in the short to medium-term. Rising costs are eating into margins, impacting profits. Plus, a cost-of-living crisis and less disposable income is impacting consumer spending. Due to the ongoing uncertainty, there’s no telling how long this could last.
However, it’s not all doom and gloom, in my eyes. JD still has an excellent market share, and according to the recent update, it continues to grow. Furthermore, its balance sheet is in good shape, which bodes well for potential stormy waters ahead too.
In addition to this, the firm continues to invest in its supply chain and store network, which will serve it well moving forward.
Finally, looking at some fundamentals, the shares trade on a price-to-earnings ratio of just seven, which is enticing. Furthermore, a dividend yield of 0.9% is a plus point, although I’d like to see this grow in the future. However, it’s worth noting that dividends are never guaranteed.
My verdict
I certainly view falling JD shares as an opportunity. I’m unable to ignore the firm’s market dominance, and growth to date, as well as future prospects.
I’d be willing to buy more shares when I have some investable cash.
For me, JD is a prime example of a business that should flourish once again when macroeconomic volatility dissipates. In the meantime, there could be some bumps in the road. However, as a long-term investor, I’m not concerned about the shorter-term outlook, but look to buy and hold shares for the long haul.
