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In late September, I bought some shares in FTSE 100 stock JD Sports Fashion (LSE: JD.). At the time, I thought they offered value. It’s fair to say the trade didn’t go as planned. Since I bought, the retailer’s share price has fallen by more than 40%!
I continue to believe in the long-term growth story here however. And I’m encouraged by the fact that week CEO Régis Schultz invested £99,000 of his own money in the company.
Lots of bad news
Since I bought the shares, there’s been quite a bit of bad news here. For a start, there was the UK budget and the National Insurance (NI) changes for employers. These changes are going to result in higher costs for retailers like JD Sports Fashion.
Then, the company came out in November and said that profit for this financial year (ending 31 January) would be at the lower end of guidance. It blamed volatile trading for the weak forecast.
More recently, the company advised on 14 January that full-year profit would be even lower. “Market headwinds were higher than we anticipated,” said Schultz.
Finally, rising bond yields are also worth highlighting. These won’t have helped the stock as the company has some debt on its balance sheet.
Short-term challenges
Given all this bad news, the outlook for the stock doesn’t look great in the short term. Right now, the company’s facing many headwinds (I really underestimated the consumer demand problems).
However, taking a longer term (three to five years) view, I continue to believe this stock can do well. That’s because this company has ambitious growth plans.
Long-term growth story
One of the reasons I bought the stock in the first place was that the retailer – which has around 4,500 stores globally – is expanding rapidly. This financial year, it’s expecting to open around 200 new stores globally. As it grows over time, its revenue and earnings should rise. This should push its share price up.
Another reason I bought was that the company’s making big moves in North America (which offers more growth potential than the UK). Recently, it’s made some major acquisitions there. In the US, it’s launching slick new stores that are appealing to consumers.
“We come with new space, new merchandising, a much more modern way of looking at it, and that’s what is winning,” Schultz said last year.
Insider buying
Now, the CEO clearly believes in this long-term growth too. Last Wednesday (15 January), he snapped up 109,933 shares in JD Sports Fashion himself at a price of 90p per share. This trade cost him around £99,000, a significant amount of money. This suggests he sees a rebound in the share price at some stage. I don’t think the CEO would have spent nearly £100k of his own money on company stock if he thought the stock was going significantly lower.
I’m holding
Looking at this insider buy, I’m happy to hold on to my shares in JD Sports Fashion for now. I’m not expecting a near-term rebound. But I do think there’s potential for share price gains over the next three to five years. Especially, with the stock now trading at less than seven times the FY2026 earnings forecast.
