I’m now wondering whether one of the best shares to buy on the entire FTSE 100 is one of its worst performers.
The company in question is JD Sports Fashion (LSE: JD) and I should add a warning here. I bought the stock on three occasions last year and every time the shares only fell further. My bargain hunting efforts have left me nursing a 20% paper loss so far.
I’m not the only one hurting. The JD Sports Fashion share price is down nearly 25% over 12 months and 45% over five years. Quite a comedown for this former FTSE growth hero.
Can the shares fight back?
Margins and sentiment have been squeezed by two disappointing Christmases in a row, troubles at key partner Nike, and Labour’s Budget hikes to employer’s National Insurance Contributions and the minimum wage.
Currently trading at less than 87p, the stock has just hit a 52-week low. The price-to-earnings (P/E) ratio is a lowly 7.3. That’s roughly half the FTSE 100 average of around 15 times.
Despite my disappointing return, I’m still cautiously optimistic about the company’s future prospects. I don’t have any spare cash right now, otherwise I’d buy more. Will I never learn?
JD Sports shares were creeping up in recent days, but this morning (3 February) they’re down 2.5% as markets digest the latest Donald Trump tariff threat. It’s hardly the only victim. Just four stocks on the index were up at last count.
The retailer has made a big move into the US, after buying Alabama-based athletic fashion retailer Hibbett for about $1bn last spring. The group’s diverse product range includes European brands like Adidas, so it could get hit by tariffs, even if Trump spares the UK.
Its most recent trading update, published on 14 January, showed like-for-like revenue decreased by 1.5% during the nine weeks to 4 January. Lower footfall was only partially offset by a higher average transaction value. Heavy discounting by rivals, particularly during November and Black Friday, hit performance.
I still think it’s a FTSE 100 bargain
JD Sports reported organic revenue growth of 3.4%, with a particularly strong December. Yet it still downgraded profit expectations to between £915m and £935m at most. That’s down from a previous range of £955m to £1.03bn.
I’m impressed by the board’s bold decision to maintain pricing discipline, even in a promotional market. With luck, this should underpin its brand integrity and long-term profitability. It could pay off when market conditions improve. Whenever that is.
JD Sports’ global expansion efforts and strong relationships with key brands also provide a solid foundation for future growth. Unfortunately, everything is up in the air right now.
Buying JD Sports shares is undoubtedly a risk. It’s still a £4.5bn enterprise despite recent slippage, so the glory growth days may never return. The yield is a threadbare 0.7%. Consumers are struggling. Are trainers the force they were?
Yet I’ve noticed that whenever the market shows sign of life, so do JD Sports shares. So yes, I still think it’s one of the very best FTSE 100 shares to consider buying today. The problem is I thought that last year too.
This post was originally published on Motley Fool
