For a company with such a strong long-term track record JD Sports Fashion’s (JD.) valuation is hugely compelling. A difficult economic backdrop looks more than priced in and a cash-rich balance sheet provides the company with the wherewithal to emerge from the cost of living crisis with an enhanced market position as less robust rivals fall by the wayside.

The seller of trainers, tracksuits and other sports and leisure wear trades on a single-digit price to earnings ratio and we see scope to beat consensus estimates should the consumer recession prove more fleeting than feared. It also boasts attractive gross margins, excellent cash generation and pedigree in navigating sector headwinds.

Why then are the shares so cheap? Concerns over consumer spending are near to the top of the list when it comes to market fears but JD has also been affected by negative news flow related to governance issues under former boss Peter Cowgill, whose stunningly successful tenure turned JD Sports into a stock market darling. The news long-serving finance director Neil Greenhalgh is stepping down in 2023 also rattled investors.

Yet it is worth noting the company has been more resilient in previous downturns than investors remember, while the spending power of its core ‘sneakerhead’ consumer is underappreciated and JD Sports has proven its ability to pass through cost inflation via price increases.

Store sales densities are more than double those of peers and it remains ahead of the pack in premium trainers, boasting an outstanding store portfolio from which it sells the best new products from sought-after brands such as Nike, Adidas and Puma. The retailer has also diversified into the gym and cycling market, while the often overlooked outdoor division has returned to profitability.

Shares regards new CEO Régis Schultz as a great fit given his track record of transforming companies through digitisation and driving multi-channel growth strategies across international markets. He’ll be looking to attack the huge global growth opportunities ahead for JD Sports, particularly in the world’s largest athleisure market, the US, following the acquisitions of The Finish Line, Shoe Palace and DTLR in recent years.

Shore Capital forecasts JD Sports will be sitting on almost £1.8 billion in net cash at its January 2023 year-end, building to over £2.5 billion by the end of fiscal 2024 to give the retailer a bumper acquisitions war chest. The broker estimates broadly flat adjusted pre-tax profits of £947 million for the year to January 2023, rising to more than £1 billion in 2024 and 2025.

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