JD Sports upgraded as capital discipline improves
Last updated: 14:45 15 Apr 2025 BST, First published: 14:32 15 Apr 2025 BST
- Bank says earlier concerns are now priced in, with free cash flow yields looking more attractive
Barclays has lifted its rating on JD Sports Fashion PLC (LSE:JD.) from 'underweight' to 'equal weight', saying improvements in capital allocation and financial controls have helped address several of the stock-specific concerns that previously weighed on its view.
The broker said JD's exposure to Nike, which makes up around half of group revenue, remains a risk, particularly with brand momentum softening.
But this is now better reflected in the valuation, along with macroeconomic headwinds and potential fallout from tariffs.
Barclays also noted that free cash flow conversion is improving.
While net income was around 45 per cent of free cash flow in 2025 estimates, that ratio is expected to strengthen.
Even after lowering its like-for-like sales forecast for 2026 to minus 4 per cent and trimming earnings estimates below consensus, the broker sees free cash flow yields of 8 per cent in 2026 and 13 per cent in 2027 as attractive.
The previous underweight rating had been driven by concerns about over-reliance on M&A to meet earnings targets and weak return-on-invested capital guardrails.
With management showing signs of tightening financial discipline, Barclays now sees a more balanced risk-reward outlook for the stock.
In afternoon trading, the shares were up 0.5% at 73.96p.
