Finally, some good news for my portfolio and from a surprising source – the JD Sports Fashion (LSE: JD) share price.
Shares in the FTSE 100-listed trainer and athleisure giant have had a dismal time of it over the past two years. They’ve halved in value, dogged by a string of profit warnings, margin pressures, struggling consumers and rising costs.
Throw in the recent shock of Donald Trump’s proposed trade tariffs, which could impact US and European brands alike, and it’s been a painful hold.
Despite buying after the first profit warning and averaging down on three separate occasions, I’m left with a 40% loss. Over 12 months, the stock is down 50%.
Can this FTSE 100 stock fly off the blocks?
So imagine my surprise when I logged into my portfolio and saw JD shares had jumped almost 10% after what markets see as an encouraging trading update.
JD reported organic revenue growth of 5.8% for the full year, helped by solid sales in Europe, North America and Asia Pacific.
That was ahead of guidance – a rare bright spot. Its new acquisitions, Hibbett and Courir, are performing as expected, while full-year profits before tax are expected to land within the January guidance range of £915m to £935m.
Gross margins were down 20 basis points to 47.8%, reflecting the impact of acquisitions, and Q4 like-for-like sales growth was just 0.3%. That’s hardly electrifying, but steady in today’s testing retail climate.
Looking ahead to the new financial year, the firm expects to keep profits in line with forecasts, though it’s bracing for a bumpiness.
Costs are rising – especially staff after April’s national insurance and minimum wage hikes – and there’s no clear view on what impact tariffs might have. JD’s guidance excludes those unknowns but investors must take them into account.
Even so, the group plans to open 150 new stores and upgrade 100 more, while closing about 50 underperformers, mainly in Eastern Europe. It also announced a £100m share buyback, suggesting management sees value in the current share price.
I can see plenty of value too – the problem is that I’ve been wrong before.
The shares are still dirt cheap with a price-to-earnings ratio of just 5.2. That’s low for a business with JD’s scale, international reach and long-term brand partnerships, even in today’s mad world.
Growth, buybacks and a low valuation
Analysts seem to agree. The 17 experts who’ve published one-year price forecasts for JD have come up with a median target of 118p. If they’re right, that would be a jump of around 70%% from today.
Forecasts are only ever guesses – and most of these will predate Trump turmoil. In today’s chaotic environment, a retailer reliant on international trade is sitting right in the line of fire. Still, it shows the potential.
I won’t be buying more shares myself. I’ve got plenty of exposure and there are other opportunities I want to chase.
Today’s update has reminded me why I bought in the first place, and why I still see long-term promise in the stock.
For anyone prepared to cope with tariff uncertainty, JD Sports shares could be worth considering. Just maybe don’t rush in right away. They’ve bounced hard today, and there’s almost certainly more ups and downs ahead.
