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Highlights:
- Acquisition of Courir: Expected to close by year-end, the deal will enhance JD Sports' presence in Europe with a stronger focus on female consumers.
- Valuation Still Attractive: JD Sports' stock remains undervalued, trading at just 10 times 2025 estimated earnings.
- US Concerns Overblown: The recent share price drop is driven by concerns around Nike and Hibbett in the US, rather than JD Sports’ core fundamentals.
JD Sports Fashion has experienced a notable decline in its share price, dropping 15% since the release of its interim results two weeks ago. Despite this, RBC Capital Markets has reiterated its 'outperform' rating for the company, pointing to its strong global footprint and future growth potential. RBC attributes the recent drop more to concerns about Nike’s performance and JD’s subsidiary, Hibbett, in the US rather than any underlying issues with JD Sports' long-term fundamentals.
Potential Upside from Courir Acquisition
RBC highlighted JD Sports' recent acquisition of Courir, a France-based footwear and apparel retailer, as a key strategic move. The acquisition is expected to close by the end of the year and is seen as a potential offset to weaker-than-expected performance from Hibbett. Courir, known for its female-focused offerings, is anticipated to broaden JD Sports’ market reach in Europe and help diversify its product range. Once integrated, JD Sports’ proforma sales would see a balanced global distribution with 37% of sales in the US, 34% in Europe, 25% in the UK and Ireland, and 4% from the rest of the world.
JD Sports Valuation Remains Attractive
Despite the recent decline in share price, RBC argues that JD Sports’ stock remains undervalued. Trading at just 10 times 2025 estimated earnings, the broker sees this as an "undemanding" valuation for a company with such a strong global presence. JD Sports continues to be well-positioned with growth opportunities in both Europe and the US, particularly with the upcoming Courir acquisition expected to bolster its European market presence.
US Market Concerns Drive Short-Term Volatility
The decline in JD Sports’ share price is largely linked to investor concerns around the performance of Nike and Hibbett, which generates 70% of its sales from Nike products in the southeastern US. However, RBC believes these concerns are more reflective of short-term market dynamics and not indicative of JD Sports’ broader growth trajectory.
Despite recent share price declines, JD Sports remains poised for long-term growth, bolstered by strategic acquisitions and a diversified global footprint. The Courir acquisition and RBC's positive outlook suggest that the company is well-positioned to overcome short-term market challenges.
