JD Sports Fashion PLC (LSE:JD., OTC:JDSPY) has spent much of the past year limbering up for recovery, but UBS thinks it is too early to call a return to form.
The Swiss bank has kept its 'neutral' rating and lifted its price target to 94p from 84p, still about 7% below the current 101p share price.
The investment story has shifted recently from near-term challenges in the United States, which accounts for about 40% of JD’s sales, to hopes of a Nike-led rebound in 2026.
UBS accepts that next year could mark a turning point, forecasting like-for-like sales growth of around 2% against consensus of 1%.
But it cautions that the retailer’s heavy reliance on the fourth quarter, which typically delivers about 40% of annual profits, leaves little room for a slip. Historically, every one percentage point of annual sales growth has added around £30m to pre-tax profit.
UBS’s latest consumer survey from the US paints a softer picture. Spending intentions among lower and middle-income shoppers, usually a good lead indicator for JD’s North American performance, have weakened heading into the crucial holiday season.
The bank expects like-for-like sales in the region to fall 2.5%, compared with market forecasts for a 1.4% decline.
The shares were flat in late morning trade.
Price increases have not yet filtered through to most consumers, but when they do, UBS warns they could dampen demand or push customers toward promotions.
The better news is that margins may be bottoming out. After several years of pressure, UBS sees JD’s profitability troughing in the year to January 2026 before a gradual recovery.
Three factors should help: a more disciplined store expansion strategy outlined at its capital markets day earlier this year, cost efficiencies from new European warehousing and integration of Hibbett, its recent US acquisition, and a potential boost from the 2026 football World Cup in North America.
The analysts have nudged up their medium-term operating margin forecast to 9% from 8.5%.
At 8.6 times forecast 2026 earnings, falling to 7.7 times in 2027, JD Sports does not look stretched. UBS expects three-year compound growth in sales of 5% and in earnings of 10%.
Still, the bank reckons the shares are fairly priced for now, and that investors may get a better entry point if US consumer momentum weakens further.
For the moment, JD looks fit enough to finish the race, but not quite ready to sprint ahead of the pack.