Investing in JD Sports (LSE: JD) shares has felt like sitting on a keg of dynamite. This FTSE 100 growth stock has blown up in my face more than once. But suddenly it’s exploding in the right way. Is it finally ready to recover?
The last five years have been brutal, with the JD Sports share price crashing almost 55%. I bought on the first dip and kept averaging down, and each time it blew an even deeper hole in my SIPP. Until now. It’s suddenly the best performing UK blue-chip of the past month, up 30%. That would have turned a £12,000 investment into £15,600. Personally, I’m still in the red overall, but only just. What brought this on?
Can this FTSE 100 recovery play keep going?
The catalyst was full-year results on 7 May, with revenue jumping 11.7% to £12.7bn. JD Sports runs 4,811 stores across 36 countries, and posted growth in every region except the ailing UK. The retail chain was founded in Bury in 1981, but its home nation now accounts for just 25% of sales.
Investors were also pleased to see free cash flow rise 36.3% to £462m, while net debt was cut by £200m to £2.8bn.
The shares climbed 3.3% on the day but the real action has come since. Like a lot of cyclical consumer stocks, it tends to lead the charge when hopes rise for an Iran peace deal. That makes me wary, because I can’t see an easy route out of that conflict.
Perhaps investors are pinning hopes on the upcoming FIFA World Cup. It’s being held in North America, now JD’s biggest market with 38% of sales.
The $1.1bn acquisition of US retailer Hibbett in July 2024 was unluckily timed, but may now pay off as sales recover. In my view, the board is wise in deciding to focus more on making the current business work, rather than expanding further.
It’s also looking to reward shareholders. The board is running a £200m share buyback, and the forecast dividend has crept up to 1.6%. Let’s not get carried away though.
Profits are expected to be flat or fall slightly in 2026. Jobs are getting harder for younger people to find. Artificial intelligence could make it harder, hitting JD customers in the pocket.
Is this FTSE 100 stock still good value?
Here’s something else to keep an eye on: the price-to-earnings ratio. At the nadir, it fell to just 5.9. That’s why I kept buying. Today it’s just over 10. That’s what happens when a stock jumps by almost a third in a month. JD is still decent value, but not an absolute bargain.
I’m thrilled by the recovery and I’m hopeful of more to come. But I wouldn’t expect the stock to jump another 30% in the next month. The real explosion will come when the cost-of-living crisis is firmly behind us. Let’s hope that’s soon.
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Harvey Jones owns shares in JD Sports Fashion.
