Owning JD Sports Fashion (LSE:JD.) shares has been a painful experience of late. At 87.5p per share, the FTSE 100 retailer’s fallen 28.4% in value since mid-August.
JD’s slump is due to a series of profit warnings resulting from weak consumer demand. For the last financial year (ended January), City analysts expect annual earnings to have risen just 1%.
In better news, the number crunchers think profits growth will heat up over the next couple of years. This is shown in the table below:
| Financial Year | Predicted earnings per share | Earnings growth | Price-to-earnings (P/E) ratio |
|---|---|---|---|
| 2026 | 12.80p | 5% | 6.8 times |
| 2027 | 14.35p | 12% | 6.1 times |
But given recent downgrades, how robust can these forecasts be considered? And should I think about adding JD, a former hero for growth share investors, to my portfolio?
Hard times
To recap, JD’s been battered due to weak conditions in its markets, and particularly so in the US. In January’s most recent profit downgrade, it said: “Market headwinds were higher than we anticipated” during the key Christmas period. It added: “With these trading conditions expected to continue, we are taking a cautious view of the new financial year”.
Like-for-like sales were down 1.5% across November and December, with declines in North America and the UK offsetting rises in Europe and Asia Pacific.
Combined, its North American and British operations account for 65% of group turnover.
Ongoing uncertainty
So what can we expect going forwards? Well judging from most recent newsflow, JD may have to wait a little longer for any sales recovery.
On a seasonally-adjusted basis, clothing and accessories sales in the US fell 2.96% month-on-month in January, according to the CNBC/NRF Retail Monitor. Weak Stateside demand has been the chief problem for JD in recent times.
Sticky inflation and its impact on interest rates continues to impact consumer spending across the firm’s markets. It’s hoped that these pressures could ease as 2025 progresses, boosting retailers’ takings.
But this is far from certain. In fact, the situation has arguably become a little more gloomy following latest Consumer Price Inflation (CPI) data from the US this week.
A figure of 3% was higher than market expectations and has cast doubt on the pace and scale of future Federal Reserve rate cuts. The possibility of new price-inflating trade tariffs coming into effect adds another layer of unpredictability.
A top value buy for me?
Yet despite these hazards, I’m still considering adding JD Sports Fashion shares to my portfolio. This is because I’m someone who buys stocks to hold for the long term. And while it may take a little longer than the market hopes, impacting current earnings forecasts, I’m optimistic JD’s sales will roar back into life, supercharging its share price from current levels.
For one thing, the global athleisure sector still has room for considerable growth. Analysts at Fortune Business Insights think sales will rise at an annualised rate of 9.82% between 2024 and 2032, driven by growing demand for comfortable, functional clothing and product innovation.
Through steady expansion, JD — which added 1,159 stores in the first half of last year — could be well placed to capitalise on this upturn too.
I’m also attracted by the company’s low P/E ratio of below 7 times. This gives the JD share price plenty of scope to rise if (as I expect) sales recover.
