It’s a familiar warning to investors that past performance isn’t necessarily a reliable indicator of future returns. Those with an interest in the JD Sports Fashion (LSE:JD.) share price will probably be relieved to be reminded of this.
That’s because, since July 2020, the leisure retailer’s shares have fallen 30%. Since their post-pandemic high of November 2021, they’re down 61%. Looking back 12 months, it’s a familiar story. The stock’s now changing hands for 18% less.
Shareholders will be hoping that the next few years will be kinder. And I think there’s some evidence to suggest they will be.
However, I don’t think there’s going to be a rapid turnaround in the group’s share price. Let me explain.
Rising sales but falling profitability
Encouragingly, for the 52 weeks ending 31 January 2026 (FY26), analysts are predicting revenue to be 5% higher than in FY25. But they’re also expecting earnings to be lower. More precisely, they’re forecasting a drop in adjusted earnings per share (EPS) from 12.39p to 11.7p.
The group’s recent expansion of its international footprint should help its top line. In 2024, it completed two significant acquisitions, including one in America, which added over 1,000 stores to the retailer’s portfolio. Positively, it’s now less reliant on the UK economy, which has struggled to grow in recent years.
But President Trump’s tariffs on imports from Asia — where most sportswear and trainers are made — are expected to affect the margin earned by the group’s US business. And closer to home, increases in the minimum wage and employers’ National Insurance are to blame for higher costs.
Falling earnings are not what investors expect, especially of a FTSE 100 company.
An improving picture
However, looking ahead to FY27, analysts are forecasting EPS of 13.2p. If they’re right, it means the stock’s trading on a multiple of just six times forward earnings. This is an incredibly low valuation multiple for one of the UK’s biggest retailers. It’s also well below the average for the Footsie.
For the shares to command a higher valuation, I think the company needs to demonstrate that it can grow again. That’s why a share price recovery might take a little while longer.
But despite facing difficult trading conditions, the group remains highly cash generative. It reported operating cash flows of £1.25bn in FY25. Impressively, although it spent heavily on acquisitions, buying more stores and refurbishing existing ones, the group was able to retain a small net cash position as of 1 February 2025.
Unfortunately for income investors, the retailer’s dividend of 1p a share is on the mean side, although I’m sure the company will argue that its current £100m share buyback programme will benefit shareholders.
Final thoughts
Despite market volatility, trading during the first quarter of FY26 was in line with expectations.
And there are signs that problems at Nike – which accounts for around half of JD Sports’ sales – are slowly being resolved. Also, the UK retailer’s strong brand and healthy balance sheet mean it doesn’t have to engage in deep discounting, unlike some of its rivals.
That’s why I plan to hold on to my shares. And for the same reasons, others could consider adding the stock to their own portfolios.
