JJB Sports targets World Cup recovery

KEITH Jones, the new chief executive of JJB Sports, will hope to convince investors this week that the struggling chain is to reap gold from next month's World Cup.

The sports clothing retailer, which came close to administration last year, is expected to announce sizeable losses when it unveils its full-year results on Thursday.

Jones, who took over the hot seat at JJB on 1 March, will need to demonstrate that the company is poised for recovery in the increasingly competitive market for sports specialists.

House broker Panmure Gordon is predicting a loss of 68.9 million for the full year. Retail analyst Jean Roche said in a note to investors that she rates the stock a "buy", particularly given steep falls in recent weeks.

"We anticipate an update from Jones on the company's strategy and early insights into his take on the business," Roche said. "We understand that JJB returned to a fully stocked position in April, just in time to benefit from produce sales related to this summer's World Cup. The real prize, however, is in the long game – the 2012 Olympic Games are likely to entail sustainable growth in sports-related spending in the UK."

However, not all agree on this point. Peter Smedley of Charles Stanley Securities predicts the UK sports retailing industry will resume its contraction of about 2 per cent annually through the next five years.

He identifies JD Sports and Sports Direct as the sector's "clear winners", but urges extreme caution with JJB. He continues to warn that the World Cup will not drag JJB out of the doldrums, a view he first aired in a note to investors at the end of April.

"JJB Sports is facing mounting competition at a time when its finances are again looking precarious and many elements of its turnaround plan are well behind schedule," Smedley said. Though he expects the results to reflect improved trading, this will still be "well below" both internal and market expectations.

JJB's sales fell sharply during 2009 as suppliers held back on stock while the company battled to avoid administration. The situation was stabilised through a 100m placing and open offer, as well as a Company Voluntary Agreement (CVA) with its creditors.