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7 reasons I reckon this is among the best FTSE 100 shares to buy 

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2020 was a testing year for many FTSE 100 stocks. Companies were unable to operate fully, which dented their financials. But some have come out ahead despite the pandemic setback. 

One of these is the FTSE 100 sports retailer JD Sports Fashion (LSE: JD). I counted not one or two reasons it stands out, but a whole seven of them. 

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Robust financials

The first set of reasons relates to its financials. It is one of the biggest index gainers in today’s trading so far, after it released its final results for the year ending 31 January 2021. There are a number of positives to note here:

#1. Revenues: Even though in-person shopping was significantly reduced, the company’s revenues have risen marginally. 

#2. Profits: It even managed to stay profitable, with only around a 5% hit to pre-tax profits. 

#3. Cash: JD Sports Fashion has substantially increased its cash pile. Its net cash, which is cash and equivalents less interest-bearing debt, is up more than 85% to £795mn. 

#4. Dividends: It has not just resumed dividends, but increased them by five times from the year before. Its dividend per share is at 1.44p up from 0.28p earlier. 

Braced for a bright future

Moreover, its operating environment has just begun to look a whole lot better for reasons ranging from its own expansion plans to the end of the lockdown. In detail, these are as follows. 

#5. Diversified group: While JD Sports Fashion’s biggest markets are the UK and Ireland, accounting for 40% of the total sales, I reckon that a big reason it has been able to sustain high performance even during the pandemic is its dispersed presence in the rest of Europe and US as well. Together they make for 55% of the company’s sales. Its recent acquisitions in the US and Poland are likely to strengthen its position in these markets further. 

#6. Retail sales growth: Retail sales grew by 8.3% in March for the UK, compared to the year before according to a survey by the British Retail Consortium and KPMG. Even though many categories, including fashion are in decline as stores were closed, broad retail growth is encouraging. Moreover, there has been a big spurt in online sales. I think this bodes well for post-lockdown sales for non-essential retailers. 

#7. Optimistic forecasts: With much going for it, JD Sports Fashion expects pre-tax profits to increase between 34% and 41% in the next year. I think this would show up in a further increase in its share price. 

What can go wrong for JD Sports Fashion

While the risk appears to be waning, I will still be a bit nervous till the pandemic is truly over. We could end up in another lockdown, greater uncertainty can mean people stop spending online too, and even robust companies like JD Sports Fashion can struggle over time. 

The takeaway for the FTSE 100 stock

I see that as a small chance though. I think the FTSE 100 stock has had a lot going for it for a while now. Going by its outlook, I think even today, this FTSE 100 stock is a good buy. 

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Manika Premsingh owns shares of JD Sports Fashion. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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