Sports Direct boosted by troubles at JJB

By GARETH MACKIE
Published on 02/09/2012 00:00

SPORTS Direct is due to deliver a positive trading update this week as it benefits from the woes at debt-laden rival JJB Sports, which put itself up for sale last week after failing to secure the funds needed to overhaul its stores.

The retailer, founded by Newcastle United owner Mike Ashley, owns the Donnay, Karrimor and Slazenger brands and is thought to have grabbed a larger share of the market thanks to an aggressive promotional campaign.

Numis analyst Andrew Wade expects the group to report on Wednesday that sales growth for the three months to the end of July have increased from 16 per cent in the previous quarter.

The company recently hit an earnings target of £225 million for the year to April, putting Ashley on track to receive eight million shares worth around £24m. To qualify for the ‘super-stretch’ targets, the company’s earnings would need to rise by 70 per cent over four years to £340m in 2015.

Wade believes the strong first quarter trading will put the group on course to meet its £270m super-stretch target for the current year.

Matthew McEachran, a retail analyst at Singer Capital Markets, said Sports Direct and rival JD Sports Fashion – which walked away from takeover talks with JJB last year – were poised to pick up a chunk of JJB’s store estate, but both firms have so far declined to comment on their intentions.

Wigan Athletic owner David Whelan, who started the chain with a single store in 1971 before standing down from the board in 2007, has also asked for information on the sale, which is being handled by its adviser KPMG.

Whelan set up rival DW Sports in 2009, when he acquired 52 fitness clubs and attached retail stores from JJB for £83.4m. On Friday, the firm teamed up with Wigan Athletic to buy a former JJB store in Wigan’s Grand Arcade.

David McCorquodale, corporate finance partner at KPMG, has described initial interest in JJB as “good”, with expressions of interest from a mix of trade and private equity firms.