Ailing JJB Sports up for sale with rival sports chains poised to pounce
RIVAL sportswear chains are likely to pounce for parts of JJB Sports after the troubled retailer put itself up for sale and warned that investors may see the value of their shares wiped out in any rescue deal.
The Wigan-based group, which runs 180 stores and employs 4,000 people, has been rocked by falling sales and tough competition from rivals on the high street and internet, and said yesterday that it had failed to secure the funds needed to overhaul its stores.
Analysts at Charles Stanley said a likely scenario would be that JJB goes into administration before parts of the
business are sold off. Another recent high street casualty, Blacks Leisure, went into administration in January before the bulk of the business was sold to JJB’s rival JD Sports Fashion.
Blacks joined a growing list of household names that have gone into administration in recent years, including Borders, Clinton Cards, Oddbins, Woolworths and Zavvi.
JJB secured its most recent lifeline just four months ago when it landed £20 million from US retailer Dick’s Sporting Goods and a further £10m from existing shareholders, including the Bill & Melinda Gates Foundation.
It earmarked £20m on converting 60 stores into a new format that produced much-improved sales and margins during trials, but admitted last month that continued poor trading meant it would need additional funds for the programme sooner than it had expected.
JJB has held discussions about securing further funds and restructuring its store portfolio but said it now believed it will not be able to raise the level of support required to implement the turnaround. As a result, it has started a formal sale process through its adviser KPMG but warned there was no certainty that an offer would be made for the company or its assets.
It added: “Given the level of current debt within the company, there can be no assurance that any proposal or offer that may be made would attribute value to the ordinary shares of the company.”
Matthew McEachran, a retail analyst at Singer Capital Markets, said Sports Direct and JD Sports were now poised to pick up a chunk of the store estate. He said: “On the assumption that a sale is unlikely, the next step is likely to be administration which will inevitably see capacity withdrawn via closures, albeit not necessarily of the entire business.”
Larger rival Sports Direct, founded by Newcastle United owner Mike Ashley, holds a stake of almost 12 per cent in JD Sports, which held tentative takeover talks with JJB last year. Both companies remained tight-lipped last night.
JJB has debts and outstanding loans totalling £36m, and saw its like-for-like sales fall 3.3 per cent in the six weeks to 26 August. Seymour Pierce analyst Kate Calvert said: “It’s a business that’s been shrinking for the last couple of years.
“They haven’t been able to find their niche in the market place and be able to take on the likes of Sports Direct and online and supermarkets.”
David McCorquodale, corporate finance partner at KPMG, said he anticipated “significant interest” from buyers.
He added: “There is a real place on the high street for a retailer of performance gear for the sports enthusiast.”
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