This FTSE 100 stock’s down 21% since I bought! Have I made a BIG mistake?
Shares in JD Sports Fashion (LSE:JD.), the FTSE 100 retailer, have fluctuated wildly over the past four months. Unfortunately, this period of volatility has coincided with me taking a position.
In August, the stock was changing hands for around 130p. That’s when I first invested. Six weeks later, the share price had climbed to just under 160p. On 22 November, it slumped to 93p. Today (13 December), it’s around 102p.
This is particularly unusual for a FTSE 100 stock. The revenues and earnings of the UK’s largest listed companies are generally more reliable. This should mean fewer shocks for investors.
Non, je ne regrette rien!
But I don’t have buyer’s remorse. That’s because I take a long-term view with my investments. Although I admit it’s difficult, I try to ignore short-term price volatility.
A quality stock should consistently deliver earnings growth, helping to increase its market cap. And I continue to believe that JD Sports is a classy business.
Caught in the crossfire
But it’s unfortunate that investor sentiment towards the retailer has apparently suffered due to well-documented problems at Nike.
As the chart below shows, there’s a high degree of correlation between movements in the two stock prices.
This is probably not surprising given that it’s estimated that approximately 50% of JD Sport’s revenue comes from the sale of Nike’s products. Indeed, the British-based retailer describes itself as the American sportswear giant’s leading global partner.
But in the world of sports fashion, I believe there’s more to life than Nike.
As the table below shows, there are plenty of other successful brands out there, all of which are sold by JD Sports. I therefore think it’s a little unfair that the company’s share price has fallen nearly 20% since Nike issued its profits warning in June.
| Brand | Revenue 2023 ($bn) | 2020-2023 CAGR (%) |
|---|---|---|
| Nike | 51.2 | 9.4 |
| Adidas | 28.8 | 7.3 |
| VF Corporation (owner of Vans) | 13.8 | 6.7 |
| Puma | 8.6 | 6.1 |
| Skechers | 7.4 | 8.2 |
A healthy market
Despite this negativity, I’m encouraged by predictions for the sector.
In 2023, the global sportswear market was estimated to be worth $397bn. This is forecast to grow to $614bn by 2031, a compound annual growth rate of 5.6%.
If the British retailer could grow its earnings by this figure each year — it’s expecting an adjusted pre-tax profit of at least £955m this year — I’d be happy.
And I see no reason why this can’t happen.
Overseas expansion
In July, it acquired Hibbett (United States), which operates 1,169 stores. During the 53 weeks to 3 February 2024, it generated net sales of $1.73bn and reported a pre-tax profit of $132m.
Four months later, it bought Courir (France), with 362 shops in Western Europe and Africa. In 2023, it reported revenue of €726m and made a profit before interest and tax of €50m.
Although the company’s half-year (26 weeks to 3 August) results disappointed investors — its shares tanked 6.1% on 2 October — they only included 10 days of earnings from the Hibbett acquisition.
But the company’s dividend is miserly — the stock’s presently yielding less than 1%. And as Nike has recently demonstrated, it’s notoriously difficult to remain relevant in a fashion industry that’s highly competitive and has to respond rapidly to changing tastes.
However, despite these risks, I think the retailer’s diversification away from the UK is a good move. And although I’m currently sitting on a paper loss, I’m confident that — over the long term — the JD Sports share price will soon move upwards.
The post This FTSE 100 stock’s down 21% since I bought! Have I made a BIG mistake? appeared first on The Motley Fool UK.
But there may be an even bigger investment opportunity that’s caught my eye:
Investing in AI: 3 Stocks with Huge Potential!
🤖 Are you fascinated by the potential of AI? 🤖
Imagine investing in cutting-edge technology just once, then watching as it evolves and grows, transforming industries and potentially even yielding substantial returns.
If the idea of being part of the AI revolution excites you, along with the prospect of significant potential gains on your initial investment…
Then you won’t want to miss this special report inside Motley Fool Share Advisor – ‘AI Front Runners: 3 Surprising Stocks Riding The AI Wave’!
And today, we’re giving you exclusive access to ONE of these top AI stock picks, absolutely free!
More reading
- This FTSE 100 stock looks good to me, so should investors consider buying it now?
- Can the stock market bull run continue in 2025? Here’s what the experts say
- 1 cheap FTSE 100 stock I’ve snapped up for 2025 and beyond
- Down 37%, here’s one of my favourite FTSE 100 bargain shares to consider
- This FTSE 100 share looks like a Black Friday bargain for me!
James Beard has positions in JD Sports Fashion. The Motley Fool UK has recommended Nike and Skechers U.s.a. 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.
