FTSE 100 share JD Sports Fashion (LSE:JD.) has endured a torrid few years. At 71.9p per share, it trades significantly below the peak of 235.7p struck in November 2021. Over a five-year horizon, JD Sports shares have fallen a colossal 61%.
As a long-term investor, I love buying beaten-down quality shares, though. So I’m giving the sportwear retailer a close look after last week’s more positive trading update.
Hargreaves Lansdown commented after the release that
JD Sports hasn’t kicked off the year in style, but there were early signs of improving trends in its largest region, North America.
Could early-bird investors be rewarded by snapping JD Sports shares up cheaply today? It’s possible…
JD Sports shares rise!
Like many retailers, JD Sports has suffered as consumers have become more picky over what they buy. A backdrop of soaring inflation, higher interest rates, and weak growth has left people with less money in their pockets.
JD Sports has been more exposed than many in its sector, too. Why? Focusing on premium brands like Nike and Adidas has paid off handsomely during the good times. But it’s left the company more vulnerable as people have sought cheaper alternatives.
Trading results on Thursday (7 May) were more positive, though. They showed “sales trends sequentially improved through the year” in North America during the 12 months to January. This is critical — the company makes roughly 40% of revenues from the region.
Investment in its digital platform and supply chains helped the business make the best of an extremely tough period. Pre-tax profit dropped 7.7% to £852m, though sales rose 11.7% to £12.7bn (or 2.1% on an organic basis).
The share price rose on the news, which was also boosted by the announcement of bumper shareholder returns. The retailer hiked full-year dividends 20% and announced a £200m share buyback programme, supported by a jump in cash flows.
So what next?
The question is: is JD Sports now over the worst? By its own admission the answer is ‘no.’
It’s expecting “muted market growth in the near term,” with consumer spending impacted further by the Iran war. Pre-tax profit for this financial to year is tipped to drop from fiscal 2026, to between £750m and £850m.
Yet it’s possible in today’s climate that we see more share price-smacking profit forecast downgrades, the most recent of which came in November. So what should investors do today?
A top FTSE 100 share
As a long-term investor, there’s a lot I like about this FTSE 100 share. It retains significant growth potential as changing consumer habits fuel the ‘athleisure’ market. And it is well placed to capitalise on this when consumer spending improves, through:
- Its leading position in the higher-growth premium segment.
- Exclusive supply agreements with sportswear heavyweights.
- The firm’s popular and expanding digital platform.
- Significant cash flows to fund long-term store expansion.
The share price collapse means it now trades on a forward price-to-earnings (P/E) ratio of 5.9 times. That’s hugely attractive for a company of this quality, in my view. While it’s not without risk, I think it’s a great share for investors seeking cheap FTSE 100 stocks to consider.
