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Via FTSE 100No stock has performed better in the past month than JD Sports Fashion (LSE:JD). Up 31% over this period and down 19% in the past year, it shot up thanks to a strong Q4 and better risk sentiment. But with it still a long way off the 2022 highs, there could be a lot more upside to this UK stock in 2023.
Reasons to be positive
Last Wednesday, the company issued a statement for the fourth quarter and the Christmas business period. In the six weeks to the end of the year, sales were up more than 20% over the same period in 2021. In the broader 22 weeks to the end of the year, revenue was up more than 10%.
This is surprisingly good performance for two main reasons. Revenues in 2021 have already set a high water mark, given the rebound in spending towards the end of the year following the lockdowns. Also, analysts have been talking about the dismal UK economy and the impact of the cost of living crisis for months. According to that, many would have expected JD Sports’ revenue to fall as people cut back on spending.
Growth in North America was also discussed. The 134 stores may be just a small proportion of its 3,300 stores worldwide, but it’s a growing presence and one that the company is investing in starting this year. This initiative should help the business accelerate to the next level. It should also help JD Sports to be less dependent on the UK business.
A UK stock that hasn’t always been in style
Reading the above, it’s no surprise that stocks have rallied recently. However, while it has been a popular stock among retail investors for years, the performance hasn’t always been so good.
After reaching levels above 200 pence in the third quarter of 2021, the share price halved in 2022. It was trading below 100 pence last October. Interim earnings fell on concerns over supply chain issues and high inflation. It also had to wrestle with negative press surrounding the departure of chief executive Peter Cowgill in May, along with the announcement of the departure of chief financial officer Neil Greenhalgh in October.
I think a key risk for this year is the stability of the senior management team. These leaders set the tone for company performance and strategy. When people come and go, this view can be quickly lost.
getting ready to buy
In the short term, I think the hype around this growth stock is high. I want to be careful that I don’t suffer at the hands of speculative traders who might sell in the coming weeks to bank the profits. This could cause a drop in price. Therefore, JD Sports is a stock that I want to buy, but I will wait for a slight pullback in the share price before investing.
