I’d consider putting £500 in this UK share today

With a spare £500 to invest in UK shares today, Christopher Ruane has been scouring the market for a share he could add to his portfolio. Here it is.

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If I had £500 to invest today in UK shares, where would I look? A lot of companies draw my attention. But there’s one in particular that I have my eye on at the moment and would consider buying.

That company is JD Sports Fashion (LSE: JD). Here are three reasons I would consider adding it to my portfolio.

Proven business model

The company has proven its business model over the years. Its 2020 revenues of £6.1bn were 795% of the 2010 figure. Pre-tax profit of £349m was 567% of the 2010 level. That strong growth in a decade would be the envy of many retailers. At a time when online competition has hurt some competitors, JD has continued to perform well both in its physical estate of over 2,400 stores and online.

As well as the JD Sports brand itself, the company operates stores and webstores under a range of names. It has shops in markets across western Europe, the US and Southeast Asia. That gives it a wealth of understanding of emerging trends and customer needs, which I regard as a competitive advantage.

More recently, the pandemic has hit performance. But in its interim results it still reported a profit, albeit smaller than the prior year. That helps explain why these UK shares have risen 48% over the past year.

A UK share with demand headwinds

I think the company’s growth demonstrates its ability to benefit from shifts in customer demand. That is not by accident, but because it has focused on optimising its brand portfolio and product ranges. Sportswear can be fast-changing, but JD has stayed relevant.

I see considerable further growth drivers here. A move to more casual workwear while people worked from home during the pandemic could benefit the sportswear market if it persists. Additionally, a growing interest in outdoor activities from cycling to walking is also likely to boost demand in the coming years.

New business areas

While I like the company for its retail strength, I am attracted by its wider footprint too.

For example, JD runs a chain of gyms in the UK. It built critical mass last year by buying 50 gyms after their owner fell into administration.

Gym businesses often struggle to survive in economic downturns. So why would I be enthusiastic about JD’s “premium low-cost proposition that competes strongly with mid-market and premium gyms”? I see cross-selling opportunities between the retail business and gyms. I also think running gyms helps give JD a deeper understanding of its target customer base. With its proven retail prowess, I think that could help sustain its growth.

JD Sports share price risks

Spending £500 on a single share doesn’t offer diversification. I would only spend £500 on these UK shares because I already have other shares in my holdings which help me lower my risk by diversification.

There are still risks if I decide to buy JD Sports shares. One of these is the rise of Amazon. JD’s digital performance is strong, but it’s still a small operator compared to the global heft of Amazon. That could hurt profitability in the industry as a whole, affecting JD.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. christopherruane has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. 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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