Down 33% in a year, is the JD Sports share price coiled to rebound?

As a shareholder in JD Sports (LSE: JD), I like the long-term investment case for the retailer. One quick look at the JD Sports’ share price however, and it becomes obvious that not everybody shares my enthusiasm.

It’s down by 33% over the past year alone. On a five-year timeframe, the JD Sports share price has fallen by 41%.

What is going on – and could this potentially present a long-term opportunity?

It’s made some investors nervous

The fall can be attributed to various factors. A series of profit warnings last year and this year certainly didn’t help things.

Part of the problem has been a difficult period for Nike. It is a key supplier for JD Sports and so when market sentiment towards the US megabrand’s poor, that often affects the JD Sports share price too.

JD’s like-for-like sales revenue in the first half showed a 2.5% year-on-year decline. A point of particular concern was sales dropping off in its home UK market. First half like-for-like sales were 3.3% lower than in the prior year period, but the second quarter showed a steeper decline of 6.1%.

That’s concerning, although the company pinned it on strong performance in the same quarter last year thanks to the Euros football tournament.

Here’s why I’m keeping the faith

But although first-half like-for-like sales fell, total sales grew. That reflects JD’s expansion in recent years, adding new shops through acquisitions and also an aggressive shop-opening programme.

While the like-for-like sales performance concerns me, I don’t think it is surprising in a market that’s struggling with weak consumer confidence. I see a risk that could worsen, as consumers rein in spending and potentially pose a threat to both sales and profits at JD.

However, the company seems in confident mood. It announced a new £100m share buyback last month and says it is on course to meet market expectations for the full year.

A potential bargain

Given its recent history of profit warnings, I’m taking that with a pinch of salt. A lot can change between now and the end of the year.

Still, those expectations are for profit before tax and adjusting items of £852m-£915m. That makes the company’s market capitalisation of £4.7bn look like a possible long-term bargain to me.

While the JD Sports share price has tumbled over the past year, it has rallied an impressive 47% since the start of April. Yet it still sells for pennies.

So could there be more to come? With its proven model, strong brand and large international footprint, I see the firm as a business to be reckoned with.

The share price has been volatile and that could continue, but I see JD Sports as potentially undervalued from a long-term perspective. I think the strong performance since April could be part of the share bouncing back, something I think may continue if it doesn’t disappoint investors again with unexpected bad news.

I plan to hang on to my shares for now and, if the price dips again, will consider buying more.

The post Down 33% in a year, is the JD Sports share price coiled to rebound? appeared first on The Motley Fool UK.

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C Ruane has positions in JD Sports Fashion. The Motley Fool UK has recommended Nike. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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