JD Sports: When Will It Be Back In Fashion With Investors?

5th Mar by Mark Simpson

11 comments 1193 reads

Summary

JD Sports Fashion (LON:JD.) is a FTSE100-listed retailer, primarily of sports fashion footwear, but also outdoor apparel and accessories, plus it runs JD branded gyms.
The company has been highly acquisitive, first under the leadership of former Exec Chair Peter Cowgill and now with CEO Regis Schulz leading the growth strategy.
Acquisitions have increasingly targeted businesses with US or European sales, which means that the business is balanced in terms of sales between the UK, US, and Europe. However, their revenue is still dominated by in-store sales of footwear.
Recent broker downgrades, especially for FY26, have exacted their toll on the share price. With no EPS growth now forecast, the shares have more than halved since September. A momentum rank of just 19 will make the company unattractive to trend-followers.
However, the company has a return on capital that is persistently higher than its cost of capital due to its brands, scale and relationships with suppliers, and trades on a P/E of around six, which means it will appeal to Quality-Value investors.
The company is highly cash-generative but pays a small dividend, preferring to retain capital to grow both organically and by acquisition. This means that investors need to trust management are deploying capital to generate shareholder value rather than simply empire-building.
Given that this is a multinational FTSE100 business with 17 brokers covering it, individual investors are unlikely to gain an informational or analytical edge. Instead, a behavioural advantage may be gained by looking through short-term trading weakness to see a quality business trading at a very cheap multiple of earnings and cash flow.

Profile

JD Sports Fashion (LON:JD.) is an FTSE100-listed retailer. It started as a single shop in Bury in 1981 and has grown to be an international retail giant. They now have 3,317 stores that focus on sports shoe retail, 243 stores focused on outdoor activities, and 1,027 other stores, mostly in the general sports merchandising space. In addition, they have over 230 JD Gyms in the UK.

For a long time, JD Sports was synonymous in investors' minds with its Executive Chair, Peter Cowgill, who was the driver behind its rapid growth strategy. He joined the company in 1996 as Finance Director and helped float the business on the stock exchange. He left in 2001, but when problems arose in 2004, he was asked to return. He said, "I'm only coming back if I'm the boss",…

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DVB99

6th Mar

great article. I like JD (which I own) and FRAS, as well, both seem very cheap at present, tempted to top up.

Andy S

Mark, thank you for this article - it covers more angles than I knew existed.

Will certainly have JD on my watch list and set some alerts for a change in share price sentiment.

johnsmith68

Thanks Mark - a really useful article and a reminder of the abundance of opportunities out there for patient investors. This is a good example of where it would be useful if Stockopedia had some kind of data driven flag to indicate the turning of the tide. Usually, by the time the momentum score ticks up, the bottom has long been in. It's certainly on my watchlist but I fear that we may have a recession between now and any solid recovery.

Mhar91

Thanks for the excellent write up mark. I am a holder, and have been averaging down, currently at 91p. I do not believe JD are finished unlike some of the members here. JD's target audience are not scared of spending over the odds on clothes, and the group have diversified well in other countries and also with JD gyms and go outdoors which is huge in the UK. Its frustrating to watch the SP dwindle down, but when we see green shoots it will take off like it has done in the past.

bruce27

Excellent analysis Mark, thank you. I have been a long time holder of Jd. It made me a good profit a few years ago. I have been buying back in over the past year. It has been frustrating to say the least. I hope it is not a case of "too big to fail" syndrome. It certainly has not been good for my nerves...neither has Card and Renold. It has only been the sensible voices on Stockopedia, along with Paul Scott, that have prevented me from throwing in the towel. Thans again. My fingers are painfully crossed until the end of March.

rmillaree

perhaps the continual downgrades to current and future earnings needs to stop fisrt - if every time they update things are worse than previously seems logical that shareprice would be trending downover - i dont have any handle on whether they are there yet with regard to getrting past that and back to things trending upwards. Therr has to be a danger here they are being squeezed from all sides - eg nike selling direct - shein competing online blah blah - costs of maintaining stores going up. So could it be the easy profits have departed the building.

I dont disagree that if the bottom (ref earnings trending downwards) is about now it looks mighty cheap - thats the easy bit of the equation though ! often p/e of 6 says tougher times are to coem even if that may not be obvious!

pippasfan

In our local town centre, M&S is busy, JD, is empty normally

Rusty2

The CEO bought £99,000 worth of shares at 90p.

Vijay Chudasama

Great article. I recently purchased and now feel more confident

davidallen77

Great article so detailed can we have more of these for fste100/250 companies a total review of the company.

gmtrader

14th Mar

It does make me wonder if jd will go the way of Boohoo. Getting out priced by Chinese companies while difficult economical times weigh down the company could see the margins squeezed. With so many stores they have to have a lot of stock to stock them.
it’s definitely cheap though if they can turn it back around again but MA is not always great when eps is falling. One to watch atm. Retail doesn’t look to be a great sector to be in atm. The uk part of JD, 30%, is saturated, so no real growth here. There are the obvious problems of NI and lack of cash by the people who would shop at JD.

Europe, 31%, doesn’t have the NI problem, but could well have similar as governments ramp up defence spending.
US, 33%, could well go into recession. Can the Trump tariffs affect the company?

The share price is obviously still in free fall. So what will halt it in the coming year? Probably better to wait for sign of a recovery or at least for the share price to stop dropping and go side ways. If the price drops to low 60p, which it is not far off now, then the company could be demoted to 250 which would likely cause a further drop.
Sorry for being a little negative here but retail really looks a sugar show atm.

JD Sports: when will it be back in fashion with investors?

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Mark Simpson

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