JD Sports shares have staged a very welcome rally after touching lows around 70p in June as trade tariff fears eased and its core supplier, Nike, surprised the market with an upbeat earnings update.
JD Sports’ valuation would suggest the share price should be higher than the current 88p that the market currently affords them. Over the long term, JD Sports is likely to retest its all-time highs above 200p.
However, the market may need more convincing to take shares above 100p in the near term. Here’s why.
JD Sports enjoyed rapid growth in the UK and set its sights on the US. Such has been the strength of JD’s penetration of the UK market that its home market offers very little in terms of opportunity for new store openings. It has nearly reached saturation point.
This by itself isn’t a bad thing, but the group is heavily reliant on like-for-like growth. Unfortunately, over the last year, JD Sports recorded a drop in like-for-like sales growth in the UK. Total UK revenue fell 3.7% in 2024.
The poor state of the UK economy is curtailing demand for £185 trainers and this is likley to persist for at least the rest of 2025, especially with the Labour government in charge.
This makes the firm increasingly reliant on the US for growth. The US accounted for nearly as much revenue as the UK last year, and its growth rate was significantly more attractive, at over 6%. This was driven by store openings, with like-for-like sales rising a meagre 0.5%. It’s highly likley the US is JD Sports’ largest geography in 2025.
The concern for investors is that while JD has set out ambitious plans for store openings globally, the economic conditions in the UK and the US do not support aggressive expansion of discretionary spending.
With new store openings being the key driver of sales growth, investors will want to see whether JD is keeping to the pace of store openings it promised. Donald Trump’s tariffs raise questions about whether this is feasible this year.
For this reason, the JD Sports share price is unlikely to breach 100p until there is more certainty around trade tariffs.
JD Sports is also highly exposed to Nike’s fortunes, with Nike goods accounting for around 45% of JD’s sales. Until very recently, Nike’s failure to innovate has weighed on JD Sports and added to economic concerns.
A positive Nike earnings update released in June revealed early signs of a turnaround, which helped lift Nike shares and, in turn, JD. However, investors will want to see additional evidence that Nike is back to its best before declaring the mini crisis over.
There are too many unknowns for the JD Sports share price to break through 100p in a meaningful way. From a technical perspective, a double top is forming around 96p, which suggests a move back to the 70p-80p range.
The 70p-80p range is the buy zone for JD Sports shares, with an eventual retest of 100p expected later this year.