Image source: Getty Images
Just when it looked like the JD Sports (LSE: JD) share price might finally be back on its feet, down it goes again.
The FTSE 100 trainer, sports fashion and outdoor brands specialist has had a torrid time since its shares spiked to 222p in November 2021. That was driven by the boom in post-lockdown demand, which the group positioned itself for by expanding aggressively, especially in the US.
It’s been misery all the way since as the cost-of-living crisis squeezed its younger demographic, forcing JD into heavy price discounting, while key supplier Nike lost its footing.
What on earth happened today?
With the price-to-earnings (P/E) ratio falling to as low as six, bargain seekers emerged in recent months. It looked like the shares might even be on the mend, but the illusion of progress was shattered today (20 August).
JD Sports shares plunged 12.3% to just 81p on today’s profit warning. The board lowered full-year 2027 pre-tax profit guidance to between £700m and £800m, down from £750m to £850m previously. The trajectory is horrible. Pre-tax profit came in at £852m in 2026 and £923m in 2025, and the shares were struggling then too. As inflation climbs, consumers are feeling the pinch. Especially younger shoppers.
Q2 like-for-like sales actually rose 0.8% in the UK and 1.4% in Asia Pacific. But they fell 2.7% in Europe, and a thumping 6.8% in North America, the group’s single largest market. Across the group, sales fell 3.1%.
At least the cash is flowing
JD Sports isn’t exactly the only consumer stock struggling right now, and it’s hardly a basket case. It remains on track to deliver free cash flow of £460m to £520m across full-year 2027. The group was net cash (before lease liabilities) on 1 August, against net debt of £125m at the same point last year.
Also, it’s just started the second £100m tranche of its £200m share buyback, which the board says reflects “confidence in our medium-term growth and cash generation”.
As a shareholder, I’m disappointed by today’s slump, but in no way surprised. I bought JD shares after its initial profit warning in January 2024, but the road to recovery has just got longer and longer. That won’t change until inflation is under control. Heaven knows when that will be.
When might this FTSE 100 stock recover?
Consensus broker forecasts, made before today’s sell-off, produce a one-year target price of 104p. That’s 27% higher than today. I’d bite your hand off for that right now. As for hitting £2? I think that’s years away.
JD Sports shares look decent value with a P/E of 10.8, while the dividend yield has crept up to 1.5%. I like buying good companies on bad news, but bargain hunters should only consider JD Sports with a long-term view. The board is on top of the things it can control, such as costs and inventory, but there’s too much it can’t do anything about. I can see far racier growth stocks on the FTSE 100 today.
Should you invest £5,000 in JD Sports Fashion right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if JD Sports Fashion made the list?
Harvey Jones owns shares in JD Sports.
This story originally appeared on Motley Fool
