JJB still struggling despite rising sales and profit margins

Shares in the company, which narrowly avoided administration last year, slumped 14 per cent after it said trading had got tougher as consumers curbed spending ahead of impending public-sector cuts.

JJB, posting halved pre-tax losses of 22 million in the six months to 1 August, said it planned to meet the testing conditions by stepping up promotions around events like the launch of the new England football kit next month.

But City analysts said the promotions could send profit margins into reverse after gross margins at the company rose to 42.2 per cent from 33.6 per cent in the first trading half.

Like-for-like sales at JJB rose 14.4 per cent year-on-year. However, chief executive Keith Jones, who joined from DSG International - now Dixons - last March, repeated his earlier forecast that the turnaround of JJB "will not be a quick fix, but will take up to three years to deliver".

He said the group's first new refurbished store, in Slough, was performing well ahead of the rest of the group with the same merchandise range.

However, Jones added: "There appears to be increasing caution in the market over discretionary expenditure."

Like-for-like sales growth at JJB slowed to 6 per cent from end-August to 26 September, the company said. Matthew McEachran, retail analyst at broker Singer, said: "In light of the worse trading and margin investment we expect forecasts to come under pressure." McEachran said he was lowering his full-year loss forecast of 21m by between 5m and 10m.

JJB avoided administration last year by selling its fitness clubs and pushing through a debt restructuring deal with creditors.

Shares last night closed down 1.6p at 9.4p.