Trainer and sportswear specialist JD Sports Fashion (LSE: JD) has been my favourite FTSE 100 growth share for years. So I filled my boots after January’s profit warning that was triggered by a poor Christmas trading period.
I’ve had a bumpy ride since but felt vindicated when the shares took off in September and suddenly found myself up 30%.
Yet the last month has been tough with the JD Sports share price falling 14.56% in that time, halving my paper gain.
There’s no way I’m selling though. I buy stocks with a minimum five-year view, and I’d love to hold this one for decades. Instead, I’m wondering if I’ve got a second chance to buy more.
The price has taken a tumble
There’s a shadow hanging over JD shares and it’s in the shape of a swoosh. Shares in key trainer supplier Nike, a major JD partner, hit a four-year low in the summer as sales slumped.
Falling demand from China, competition from cheap rivals like Hoka, and a decision to sell direct to consumers while cutting some third-party retailers were all to blame. When Nike withdrew its full-year financial outlook and lowered second-quarter earnings expectations on 1 October, JD Sports took a hit, too.
That was despite JD publishing a positive set of half-year results the next day, which showed half-year profits up 2% to £405.6m. That was better than expected, given today’s “challenging and volatile market”.
Bury-based JD has problems of its own, as attacks on Red Sea shipping by Houthi rebels hit deliveries, while a wet spring reduced demand for camping at its chains Millets and Blacks.
The figures only included a a 10-day contribution from US acquisition Hibbett, but it now represents 40% of group revenues and should contribute £25m to full-year profits. JD is plotting huge expansion in the US market, with 700 new stores planned in four years.
Shops are still discounting heavily to attract customers as the cost-of-living crisis drags on. Nike remains a problem. At least JD has Adidas though. While the Nike share price is down 20% in a year, Adidas is up 30%.
This FTSE 100 stock looks great value
In the long run, Nike’s mis-step could help JD Sports. I’ve always been concerned that big name brands might decide to bypass JD and go their own way, but as Nike has shown, this opens up floor space for cheaper or more on-trend rivals.
JD Sports shares are up a modest 4.56% over 12 months, but they’re down 38.06% over three years. I still think there’s a big opportunity here.
The shares look good value with a price-to-earnings ratio of 10.9. The price-to-sales ratio is just 0.6, which suggests investors are paying just 60p for every £1 of revenues.
The 13 analysts offering one-year share price forecasts have a median target of 174.15p. That’s up more than 30% from today. This confirms my view that I’m looking at a brilliant opportunity to load up on my favourite growth share, so that’s what I’ll do.
This post was originally published on Motley Fool
