The Santa Rally phenomenon that regularly sees stock markets rise strongly over the last two weeks before Christmas may have passed us by this year with the FTSE 100 down 3.9% and the FTSE All-Share down 4.05% but sports retailer JD Sports has managed to stage its own little personal version. As of the end of the last week of December, the JD Sports share price had dropped around 30% over the two months since September, caught up in by the wider retail sell-off that his blighted the period.
As consumers cut back their spending, along with the traditional ‘unseasonably warm weather’ mitigation, retailers from Superdry to Bonmarche and even online ecommerce champion Asos have issued profit warnings. The result has been a broad-based flight from retail stocks. However, those investing online with their eyes fixed firmly on the fundamentals of the stocks they hold and uninclined to be caught up in emotion, may have long ago noticed JD Sports have quietly been doing quite well. In September the company reported a record quarter of trading, something which has become a trend for the more upmarket competition to Sports Direct on the UK’s high streets.
While Mike Ashley’s Sports Direct has made a controversial success of the ‘pile ‘em high and sell ‘em cheap’ discounter approach, JD Sports has carved out its own success with a more curated approach to the stock it sells. Exclusive product agreements for ‘new’ Nike and Adidas ‘athli-leisure’ product lines have proven a roaring success and give JD Sports fine profit margins. And its share price surged at the end of last week on the back of a very positive 41% increase of Nike’s online sales. That’s provoked investors into reconsidering their recent bearish position on JD Sports and sent its share price surging 7.2%.
The chain’s revenue is still majority driven from the UK but there is now also a significant presence in Europe and Asia Pacific. A foothold in the USA has also been established recently through the acquisition of the footwear chain Finish Line. The future looks bright for JD Sports and is further evidence that investors should pay less attention to wider sector trends and keep their eyes on the merits of the individual companies they hold.