In April, a few days after President Trump unveiled his tariff plans, the JD Sports Fashion (LSE:JD.) share price fell to a 52-week low. Since then, the stock’s risen more than 50% and currently (28 July) changes hands for around 91p.
But the ‘King of Trainers’ share price remains shy of 100p. The last time it was above three figures was at the start of trading on 21 November 2024. By close of business that day — after announcing that earnings for the 52 weeks ended 1 February 2025 (FY25) would be at the lower end of guidance – the group’s shares tanked more than 15%. And they’ve remained below 100p ever since.
What’s going on?
It’s clear to me that the uncertainty surrounding Trump’s trade policy is weighing on the share price. Following a series of acquisitions, the US is now its biggest market accounting for around 45% of operating profit.
And with most of the products that the group sells being made outside of America — mainly in Asia — it’s vulnerable to higher import taxes. Additional tariffs can either be absorbed or passed on to consumers. Either way, they’re likely to damage earnings. Although negotiations between the US and most countries in the Far East are ongoing, very few trade deals have been signed.
And this uncertainty is damaging confidence, which could lead to a slowdown in the US economy and leave consumers with less spare cash to buy trainers and tracksuits. Some economists are still predicting a recession this year.
I suspect these big ticket items need to be resolved before the JD Sports share price can move higher. And the fact they haven’t probably explains why analysts believe the group’s shares are currently fairly priced. Their average 12-month share price target is 95p.
Reasons to be optimistic
But if a global trade war can be averted, I believe JD Sports should do well.
That’s because it remains highly cash generative and was in a net cash position at 1 February 2025. During its past two financial years, it’s made a combined £2.37bn from its operating activities.
Like any business with free cash, it has a number of options available to it, all of which should help create shareholder value.
For example, it could expand by buying more stores. Alternatively, it could refurbish existing ones. Either strategy should help grow future revenue and earnings. Another option is to increase its dividend. This is a way of putting more cash directly into the pockets of shareholders.
My view
And now could be a good time to buy the stock, when it’s currently trading on a lower multiple than many other retailers and below its own recent historical average. For FY26, analysts are predicting adjusted earnings per share of 11.7p. This means its forward price-to-earnings ratio is 7.9. Looking ahead to FY27, it drops to seven.
Personally, I think investors are currently pricing in concerns about America’s trade policy and its potential impact on both the domestic and global economies. However, a trade war isn’t in anyone’s interests so I remain hopeful that deals will be reached with most of Asia’s manufacturing hotbeds.
If I’m right, I reckon the group’s share price will rise above £1 again. And for this reason, investors could consider adding the stock to their portfolios.
