JJB battling for fitness as sales dive triples loss

SPORTSWEAR retailer JJB Sports yesterday warned that its recovery would be neither quick nor easy, as full-year pre-tax losses tripled, reflecting a haemorrhaging of sales in 2009.

Keith Jones, who joined as chief executive in March from electricals retailer DSG International, said trading had improved in the new financial year as stock for the World Cup and summer ranges hit the shelves.

Jones said his turnaround strategy will focus on targeting keen amateurs, recreational sports participants and sporting families, a market he estimated to be worth 2.5 billion.

He said: "There are no short cuts to be taken while turning this business around and we expect it to take three years of hard work and determination."

Jones plans store refit trials, enhanced trading over the internet and better products and promotions.

"We have to heal the scars of the past and get much, much better at the basic business of retailing," he added.

The 250-store group sold its fitness clubs for 83 million last year, pushed through a debt restructuring deal with creditors, raising 100m of new capital and renegotiated banking facilities.

JJB suffered an underlying pre-tax loss of 68.5m in the year to 31 January, compared with forecasts for a loss of 63m-69m and came after a 21.8m deficit in 2008- Revenue slumped 42 per cent to 372.5m after suppliers, fearful of the company's future, held back new stock.

Like-for-like sales fell 27.3 per cent, while gross margins plummeted by 8.9 percentage points.

But in the 16 weeks to 23 May, like-for-like sales rose 7.5 per cent and are up 19 per cent in May so far. Gross margin had also improved 6.8 percentage points to 43.6 per cent.

However, analysts noted net cash has dipped to 5.6m from 58.5m at the year-end.

Matthew McEachran, analyst at Singer Capital Markets, said the fall in net cash highlighted JJB's cost of funding working capital and the continuation of losses in the current year so far.

Ed Woolfitt, head of trading at Galvan Research, added: "The World Cup benefit for JJB is almost akin to rearranging deck chairs on the Titanic, given the substantial fall in revenues and full-year losses.

"We still believe the shares should be avoided until the retailer is able to release a positive improvement showing a clear revenue boost and operating profits over a sustained period, indicating a sustained turnaround.

"At 20.25p, in our book, the sports retailer remains 'JJB Shorts', and the shares remain a sell into any strength."

JJB yesterday named John Clare as chairman. He had been acting chairman since January.