The last 12 months have been a bit of a rough ride for the JD Sports Fashion (LSE:JD.) share price. But investors who recently used the tumbling valuation as a buying opportunity have been rewarded with some double-digit gains. In fact, just in the last three weeks, the share price is up almost 30%!
Has management turned things around? And should other investors be hopping aboard the gravy train?
What’s going on with JD?
There are a lot of factors influencing the valuation of this sports fashion retailer. However, the most prominent is undeniably the recent stream of profit warnings.
The firm suffered weaker-than-expected sales during the festive season thanks to a general reduction in consumer discretionary spending. And intense promotional activity from rivals like Sports Direct (owned by Frasers Group) has only exacerbated the pressure.
Economic woes are ultimately temporary, but it does highlight the firm’s sensitivity to the economic environment. Fortunately, on 9 April, management provided shareholders with a trading update that provided some much-needed encouragement.
Organic sales and pre-tax profits have remained on track with the group’s revised guidance, and the early performance of its 2026 fiscal year (ending in February) has also been in line with expectations. Moving forward, management has cautioned that due to uncertainty with US tariffs and continued economic uncertainty, the next 12 months may be a volatile trading period. Nevertheless, it’s definitely a nice change of pace compared to a few quarters ago.
Time to capitalise on momentum?
Pre-tax profits for FY 2025 are expected to land between £915m and £935m. Yet for FY26, this figure is currently on track to sit between £878m and £982m when looking at the range of City analyst opinions.
The average consensus sits around £920m, indicating the mood among professionals is that JD Sport’s underlying earnings are going to be relatively flat over the next 12 months. That’s not too surprising given the incoming hike of employer National Insurance contributions.
Despite this, the JD Sports share price is still rising, with a 12-month price target of 95p. This implies that the previous sell-off might have been overblown. And with the uncertainty clearing up, sentiment is once again improving, driving a welcome return of momentum.
Strong brand partnerships, particularly with Nike, certainly give it a strong hand compared to other sports retailers. And with gross margins sitting a bit higher than many of its peers, JD Sports does seem to be a financially robust enterprise. So, for investors looking for exposure to this sector, this one certainly seems to be a good place to start looking. Even more so, with a forward price-to-earnings ratio of just 6.6.
However, it’s important to remember that even at a cheaper valuation, the business will remain susceptible to the consumer spending environment. And should it weaken further, another profit warning could emerge, restarting the stock’s recent downward trajectory.
