Investors sent the JD Sports Fashion (LSE:JD.) share price higher in early trading today (27 August) as they appeared to give a big thumbs-up to the sports retailer’s latest market update. This is despite a confused sales performance.
During the 26 weeks to 2 August (H1 26), the group reported a fall in like-for-like sales of 2.5% compared to the same period last year. This measures the performance of existing stores and ignores any shop conversions or expansions.
By contrast, organic sales – which excludes the impact of acquisitions, disposals and currency movements — were 2.6% higher.
The company noted that last year’s figures were helped by Euro 2024. Incidentally, next year will see the staging of the 23rd World Cup.
Turnover is vanity, profit is sanity
Undoubtedly, a retailer’s top line is important. But it’s earnings that matter even more. Here, the group reiterated that it’s trading in line with the current market consensus. Analysts are expecting profit before tax and adjusting items for the full year (FY26) to be £885m (range: £852m-£915m).
But this is still lower than the £923m reported in FY25. And it’s less than FY24’s £961m.
On the face of it, the group appears to be going in the wrong direction, which probably explains why its share price is now languishing around the 100p mark. In late 2021, it was over 230p.
Looking ahead
Despite the mixed sales picture, the group remains bullish. It says it’s making “strong progress against strategic objectives” and that its cash and costs are being “well controlled”.
And the group continues to avoid engaging in significant discounting, which can be a feature of the industry. Instead, it relies on its brand to keep its margin higher than many of its rivals. Having said that, including acquisitions, its gross margin was 60 basis points lower in H1 26 compared to H1 25.
The positive share price reaction might also be explained by the announcement of another £100m share buyback programme. Personally, I’d rather this cash be used to bolster its rather meagre dividend.
But the group remains cautious about the impact of President Trump’s tariffs, although it’s more concerned about the potential effect on consumer demand rather than on the direct cost to the group.
And with an estimated 50% of its revenue coming from Nike’s products, ongoing issues at the American sportswear giant could be a problem. From June, it raised the prices of its trainers costing more than $100 by up to $10. It’s unclear how this will impact sales.
However, as a shareholder, I remain optimistic. And even with today’s price jump, I still think the stock offers good value. If the analysts are right, adjusted earnings per share for FY26 will be around 11.7p. This means the stock’s trading at only 8.4 times forecast earnings.
For a retailer with a healthy balance sheet and strong brand — that’s operating in a growing market — I think that’s cheap. That’s why I plan to hold on to my shares and why other investors could consider adding the stock to their own portfolios.
