JJB sales boost survival hopes

By GRAEME EVANS
Published on Monday 20 February 2012 10:58

The survival hopes of ailing sportswear chain JJB Sports were lifted today despite another batch of negative trading figures.

The group’s like-for-like sales were down by 7.6 per cent in the 26 weeks to 29 January, but this was better than the 17.9 per cent decline over the previous half year.

While analysts said JJB still has a mountain to climb, with losses of £60 million expected for the year just completed, shares jumped 20 per cent today on hopes the figures signal the start of improved trading fortunes.

Freddie George, a retail analyst at Seymour Pierce Stockbrokers, has maintained his “sell” recommendation and expects another two years of losses.

“We are, however, becoming more confident on the outlook,” he added.

Last year, JJB was forced to secure £96.5m in funds from major shareholders, as well as announce plans to close 43 unprofitable stores and place a further 46 on review in a bid to stave off administration.

Its problems stemmed from stock supply issues and intense competition, including from rival Sports Direct International.

As well as slowing the decline in like-for-like revenues – albeit against weak comparisons – the company has been encouraged by the profitability of those sales, with margins up 32.1 per cent in the five weeks to 29 January.

Chief executive Keith Jones said the retailer’s performance was broadly in line with expectations despite challenging conditions.

He added: “As we commented last month, weaker UK employment numbers and the ongoing credit squeeze on consumers create a tough environment.

“However, we are continuing to implement our turnaround aware of the importance of the key trading opportunities afforded by the European football championships and London Olympics”.

The group’s turnaround scheme involves cutting costs and increasing sales through investing in staff training, upgrading some of its 160 viable stores and improving its ranges.

It has devised plans for three types of stores which will help to tailor its stores to suit their location and will stock more exclusive ranges such as Slazenger Golf and Run 365.

George said he still needed convincing that the company has a clear strategy to turn around the business.

He added: “The company needs to find a niche and a format, which is differentiated from its competitors, to take advantage of the forthcoming sporting events.

“In the meantime, competition is intensifying, the cash position is a concern and the economic outlook does not look any better for the company’s core customers.”

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