JJB bullish despite City concern that sports chain is running out of time

JJB Sports yesterday insisted it had sufficient funding in place as analysts warned that time was running out to turn around the ailing sportswear chain.

The group, which has been forced to close stores and strike a rescue deal with its landlords in the face of crippling competition, said pre-tax losses had widened to £66.5 million in the 26 weeks to the end of July from £24m a year ago.

JJB cautioned the City on its full-year outcome after trading deteriorated further in September and October.

Finance director Dave Williams said the business was not in danger of running out of cash.

“We looked at our forecasts fairly hard for the next 12 months and ran a number of scenarios based on the macroeconomic environment and the consumer environment and under all cases we have sufficient funds,” he said.

Freddie George, a retail research analyst at stockbroker Seymour Pierce, said the interim results were worse than expected, adding that it was “worrying” that the second half had “not got off to a great start”.

Sticking with his “sell” recommendation on the stock, George said: “Management, in our view, is running out of time to turn this business around. It needs to find a clear niche and a format, that is differentiated from its competitors to take advantage of forthcoming sporting events.

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

JJB, which trades from 195 stores and employs some 4,500 staff, competes with supermarkets and online retailers as well as larger rival Sports Direct, which – with its bustling out-of-town and high street stores – appears to have cornered the sports clothing market.

The firm’s rescue deal with landlords in March was the second in two years and allowed it to close poorly-performing stores and cut rent payments on others. Without the deal, the chain was at risk of falling into administration.

The Wigan-based group has shut several Scottish outlets. One of its biggest – at Hermistion Gait in Edinburgh – is due to reopen later this month as the second Scottish outpost for French sporting goods giant Decathlon.

JJB’s strategy is to target keen amateurs, recreational sports participants and sporting families, with better stores and new and improved product ranges.

It is hopeful of a fillip to sales from the Euro 2012 football championships and London Olympics.

Chief executive Keith Jones said: “We always said it was not going to be quick and it wasn’t going to be easy. But we are making good progress and I think the shareholders at the point at which we went through the capital raisings earlier on this year were very clear this is a three-to-five-year window.”

The first-half results revealed that total sales had slumped by more than a fifth to £142.4m.

The company, which counts Microsoft founder Bill Gates among its key shareholders, ended the period with net funds of £17m, having raised £96.5m over the past year to fund its turnaround plan.

Philip Dorgan, an analyst at Panmure Gordon, JJB’s house broker, said investors’ focus would be on whether management can continue to fund the business. He said there was a risk that an expected sales recovery would not materialise and raised his forecast for underlying pre-tax losses for the full year to £50m from £40m.

“On our new numbers, JJB has minimum headroom of £10m over its banking facilities,” added Dorgan.