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Investing.com -- RBC Capital Markets in a note dated Friday said it expects JD Sports Fashion (LON:JD) to recover in fiscal 2027 following a challenging year marked by weaker like-for-like sales and cost pressures.
Shares of the British sports-fashion retailer were up 2.6% at 04:14 ET (08:14 GMT).
The brokerage maintained its “outperform” rating on the retailer and raised its long-term sales growth forecast to 4% from 3%, citing JD’s potential to gain market share in most regions where its presence remains relatively small.
RBC described fiscal 2026 as a transition year, projecting a 2% year-over-year decline in like-for-like sales and a drop in adjusted pretax profit to £869 million from £923 million in fiscal 2025, partly due to labour and cost headwinds.
The brokerage expects earnings to stabilize and begin improving in fiscal 2027, helped by a stronger product pipeline from Nike (NYSE:NKE), supply chain efficiencies, and contributions from recent acquisitions such as Hibbett in the U.S. and Courir in Europe.
Nike’s recovery is seen as central to JD’s rebound prospects, with the sportswear brand shifting focus from direct-to-consumer channels back toward wholesale partnerships and introducing more competitive running shoe lines.
JD, which generates about 45% of sales from Nike products, is expected to benefit from reduced inventory overhang at Nike and an increase in full-price sales.
RBC forecasts adjusted diluted earnings per share to rise from 10.65 pence in fiscal 2026 to 11.13 pence in fiscal 2027, with revenue increasing to £12.84 billion from £12.58 billion.
The brokerage flagged JD’s relatively low valuation of about 8 times estimated 2025 earnings and a free cash flow yield projected to rise from 8% in 2025 to 10% in 2026.
RBC’s price target of 95 pence is based on a discounted cash flow model assuming a 4% long-term sales growth rate and an 8% EBIT margin, reflecting what it sees as an undemanding level if JD can deliver sustainable earnings growth alongside Nike’s turnaround.