One of my best stocks to buy, JD Sports (LSE:JD), looks more attractive than ever right now. Here’s why I’m seriously considering adding more shares to my holdings.
Undisputed king of trainers
JD Sports is one of the premier sportswear brands in the UK. It has a large store presence throughout the country and is growing internationally too, with a focus on the US. It continues to diversify its business and has forayed into the lucrative gym market.
Retail has been a tough sector in recent years. The shift to online, coupled with changing shopping habits, the rise of technology, and the e-commerce boom has seen many retailers fall by the wayside. Not JD, however. It has continued its impressive growth trajectory.
So what’s happening with JD shares currently? Well as I write, they’re trading for 118p. At this time last year, the shares were trading for 195p, which is a 39% drop over a 12-month period. JD shares falling doesn’t concern me as I am invested in its longer-term growth and believe its shares will bounce back.
The best stocks to buy have risks too
The rise of online fast fashion has changed the clothing market in recent years. Cheaper alternatives, shipped faster via online only methods have placed pressure on more traditional retailers like JD Sports. There is no doubt this burgeoning trend has affected market share. This, in turn, can have a negative impact on performance and investor returns.
Next, recent macroeconomic headwinds such as soaring inflation, rising cost of materials, and the supply chain crisis have had an impact on JD Sports. Rising costs could squeeze profit margins, which will affect performance and investor returns. The supply chain crisis could mean consumers are unable to purchase their favourite items, leading them directly to competitors.
Why I’d buy more JD Sports shares
So let’s look at the positives. I always refer to a firm’s performance history. I do understand that past performance is not a guarantee of the future, however. Looking back at JD Sports, it has an enviable record of performance growth over the past four years, growing revenue and profit consecutively in this period.
Next, at current levels, JD shares look good value for money on a price-to-earnings ratio of just 15. Furthermore, impressive performance has led to dividend payments that would boost my passive income stream. The shares currently yield less than 1%. It is worth remembering dividends can be cancelled, however.
Many investors have moved away from growth stocks and towards safer defensive options. However, my investment strategy has always been with the longer term in mind.
I believe the future for JD looks bright. It is building two new logistics centres in the UK and Netherlands to meet growing demand and improve customer service. Next, it also has unique agreements with some of the biggest brands. Take Nike for example. JD is one of Nike’s top customers in the world. I believe this offers it leverage over a key supplier.
In a competitive market like retail, these advantages and investments can make all the difference. I believe this growth will underpin continued performance growth, which will provide me with stable returns for years to come.