Last year I bet the farm on a beaten-down UK growth stock I’d been watching for years. Well, not quite the farm, but a fairly hefty slice of my Self-Invested Personal Pension (SIPP). So far it hasn’t paid off, but I’m seeing signs of a recovery and I’m hoping for more to come.
The stock is trainer and athleisure specialist JD Sports Fashion (LSE: JD). It’s had a rough ride thanks to the cost-of-living crisis, troubles at key supplier Nike, and now Donald Trump’s tariffs on Chinese goods. All this came just as JD was making a big push into the US with its $1bn purchase of US retail chain Hibbett.
The shares are down 30% over the last year but they’re fighting back to climb 25% in the last six months. That’s trimed my paper loss and I sense momentum may be turning. Or am I kidding myself?
UK retailer under pressure
JD is one of the UK’s retail success stories, but it hasn’t been immune to shifting consumer habits and tighter household budgets. In its half-year results on 27 August, group sales slipped 2.5% on a like-for-like basis to £5.9bn, with both the UK and North America struggling. However, organic sales improved in the second quarter. JD also treated investors to a £100m share buyback and looks set for full-year profits of £915m. Not bad for a company with a modest £4.85bn market cap.
Its expansion has been relentless, with new stores and acquisitions pushing revenues far above the £2.5bn reported five years ago. The investment has squeezed profits but with luck will pay off in the longer run.
Low price-to-earnings ratio
Today, JD trades on a trailing price-to-earnings ratio of just 7.5. That’s exactly half the 15 that’s typically seen as suggesting fair value. While I think that looks exciting, I also have to admit that a low P/E may also be a sign of low investor expectations. It’s certainly no guarantee that the stock will take off.
Yet the experts are optimistic. Consensus forecasts produce a one-year stock price target of 121.6p, which is nearly 27% above today’s 96p. That would be a brilliant recovery, although much depends on factors such as the state of the US and UK economies, as well as tariff policy.
Long-term worries
Another worry for me is whether athleisure has peaked. Fashion trends change, and if demand weakens, JD could struggle. The casual trend won’t run out of steam but let’s say young consumers decide to wear comfy/on-trend loafers or ballet flats more often instead of trainers. Its reliance on Nike for almost half its sales is another concern. Its shares are down a third in 2025.
Having recently visited JD’s flagship Bond Street store it’s clear the brand is geared to younger shoppers, yet they’re also most at risk from a slowing jobs market and AI disruption. If incomes stay squeezed, demand for branded trainers could falter. I went during the Boxing Day sales period and it wasn’t as buzzy as I’d hoped.
That said, this is a business with a strong global presence and market share. It’s not quite a no-brainer, but at today’s levels I think investors might consider buying. I’m holding on to my stake and hoping the next leg of the recovery is just getting started.
