JJB Sports losses widen as group warns of five-year recovery plan

Sportswear retailer JJB warned its recovery could take up to five years as it revealed further hefty losses yesterday in a year when it came close to collapse.

The group, which has more than 200 stores in the UK and Ireland, has started to overhaul the business after it secured landlords' backing for a rescue deal. JJB revealed plans to refit 150 stores this year, but said its restructuring would not be "easy or quick" and could take three to five years.

The warning came as the group reported a 9 per cent increase in adjusted operating losses to 73.9 million in the 52 weeks to 30 January. But its pre-tax losses more than doubled to 181.4m after one-off exceptional items of 108m.

It said the decline in gross margin reflected "poor stock packages available to the business and the need for highly-promotional sales initiatives to drive footfall and clear stock during the second half".

JJB secured its survival with the help of 96.5m in funds from major shareholders, including a foundation set up by Microsoft founder Bill Gates and his wife Melinda.

It also re-negotiated its 25m banking facility with Bank of Scotland to May 2014.

The cash will allow JJB to press on with its restructuring, which includes closing 43 unprofitable stores and placing a further 46 on review. The chain, which employs about 5,200 staff, has shut 18 stores since the end of January.

The company will also refit its estate, source new product ranges, retrain its staff and broaden its online offering, as well as make further cost savings.

The new stores have improved layout and labelling, and are targeted at keen amateurs, recreational sports participants and sporting families.

Chairman Mike McTighe said JJB now has a "real chance of recovery", but he added "this is the beginning of the hard work and not the end".

He said: "The restructuring of JJB will not be easy or quick and will most likely take three to five years. The retail environment is challenging, will remain so for some time and we face intense competition.

"But the work undertaken over the past six months, together with the crucial support of all our stakeholders have given JJB a chance to survive and ultimately to prosper and I look forward to working with our management team to make this happen."

Among the positives, like-for-like sales at JJB's remaining stores increased by 5.9 per cent during the period.

It has already refitted six stores, which have performed 16 per cent above the company average and will be the basis for the planned revamp across the whole estate.

Shares in JJB fell 6.7 per cent after yesterday's results were published.The share price has plunged 85 per cent from a year-high of 166.3p to 24.5p yesterday.

Freddie George, a retail analyst at investment bank Seymour Pierce, said he did not expect JJB to break even until 2013.

He said: "Although the company is now on a much sounder footing, it will, we believe, be a long haul back to recovery.

"The strategy, which is likely to evolve during the lead-up to the 2012 Olympics and European Championships, is still unclear."

Nick Bubb, retail analyst at Arden Partners, said JJB's results were "predictably disastrous".