Many FTSE 100 stocks have held up pretty well recently. Despite all the uncertainty about inflation, interest rates, mounting government debts, and the Middle East conflict, the blue-chip index is still up almost 18% in a year.
However, the following two Footsie shares have been underperforming. Is it time to consider these laggards?
A fading crown
JD Sports Fashion (LSE:JD) is down 59% in five years. As a result, the self-styled ‘King of Trainers’ isn’t too far off relegation to the FTSE 250.
This is a spectacular fall from grace for a former stock market darling. What’s gone wrong?
Well, the problems were on display in the company’s recent Q2 trading update (covering the 13 weeks to 1 August). In this, we read phrases like “consumer pressures“, a “promotional market“, and “generally lower” store footfall.
Worryingly, like-for-like (LFL) sales fell 6.8% in North America, where JD makes over a third of its sales. The UK (+0.8%) and Asia Pacific (+1.4%) offered some hope during the quarter, but not enough to stop group LFL sales declining 3.1%.
JD also flagged “ongoing product cycle evolution across key brand partners“. This relates to another worry I have, which is Nike‘s ongoing battle to reinvigorate the brand. The US sportswear giant accounts for over 40% of JD’s sales.
For the FTSE 100 stock to bounce back strongly, I think three key things need to happen: Nike starts growing again, the cost-of-living crisis abates, and youth unemployment falls. Sadly, I’m not confident about any of these, at least not yet.
Admittedly, the stock does look very cheap, trading at just seven times forward earnings. If the firm can get sales growth back on track, the share price could absolutely rocket higher. JD still enjoys a very strong brand and operates globally.
But with management lowering FY27’s pre-tax profit guidance to £700m-£800m, down from £750m-£850m, I’m struggling to get excited. Meanwhile, the dividend yield is just 1.43%.
Until the consumer backdrop improves, I won’t consider buying this stock.
Healthcare drifter
The Haleon (LSE:HLN) share price hasn’t dropped off a cliff like JD’s, but it’s only up about 3% over the past year. Since being spun off from GSK in July 2022, it’s risen 19% versus 48% for the FTSE 100.
And this is my problem with the consumer healthcare firm — a lack of growth. After all, most markets for its pain relief products (Advil, Panadol) and toothpaste (Aquafresh, Sensodyne) are very mature.
These brands face pressure from supermarket own-label products, which are obviously cheaper. Speaking personally, I may buy Haleon’s brands if they’re on offer, but I’m not particularly loyal. I worry how far pricing power can ultimately stretch long term.
Revenue in 2026 is expected to be £11.3bn, the same as 2023, but Haleon is targeting high-single-digit adjusted operating profit growth over the medium term. So I can potentially see the appeal as a defensive consumer staples stock.
Again though, the dividend yield is quite low at just 1.95%. And the stock doesn’t seem particularly cheap at nearly 17 times forward earnings.
Weighing everything up, I see better opportunities elsewhere in the FTSE 100, both in terms of income and potential share price growth.
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Ben McPoland has no position in any of the companies mentioned.
This story originally appeared on Motley Fool
