Martin Flanagan: Sporting lifeline could put JJB back in running

AS THEY say in footballing circles, JJB Sport, the beleaguered retail chain, has got a result, meaning a triumph.

Despite gradually bringing down its horrendous losses and squaring its landlords a year ago with a rent restructuring agreement that kept it out of the maw of administration, JJB still looked like a business en route to the football-shirts ’n’ trainers graveyard.

The company was caught in the classic, high street squeeze of being the stumbling middle-market operator.

Pile it high, sell it cheap Sports Direct was mopping up the massive downmarket section of the sports retailing waterfront through a mixture of sheer scale and aggressive price cutting. At the other end, JD Sports had the preppy, stylish slice of the sector wrapped up.

Meanwhile, embattled JJB struggled along with what looked an untargeted offering, stretched supply lines and serial management change.

But the financial lifeline thrown to the company yesterday by a major player from the US, Dick’s Sporting Goods, along with big investment from a leading supplier and existing shareholders, looks a potential game-changer.

Certainly, if JJB’s shareholders endorse a deal that should eventually leave the Americans in majority control the threat of administration has sharply receded.

The boost is not confined to the potential £40 million Dick’s could plough in to accelerate a turnaround programme at the British company, or the morale-boosting further financial support from the likes of Adidas, Bill and Melinda Gates, and other big existing investors.

Equally relevant is that American retailers tend to need lessons from no-one on targeted offers, customer service and slick marketing. Dick’s is likely to bring all of that to JJB. With representation on the JJB board there is likely to be an immediate injection of insight and snap.

The flipside of the coin, however, is that this is hardly the “strategic alliance” it is fondly portrayed by JJB chief executive Keith Jones. It looks like an American takeover by the backdoor.

But JJB was out of options. Its continuous talks with its banks, restructuring and sale of underperforming branches had bought it time from any descent into administration.

But the company correctly surmised that, in the likely bleak retailing climate of the next few years, it might well effectively be running to stand still. That’s why JJB gave its advisers KPMG a definite brief last January: find us a strategic investor. Dick’s, which wants to expand out of its American base, didn’t hang about when presented with the opportunity.

JJB’s continuing big losses unveiled yesterday starkly highlight why such a partner is needed to rev up and underpin its new strategy of revamped stores and multi-channel retail distribution. (Admittedly this is not rocket science, it is the template for a swathe of the battered retail sector).

JJB currently resembles a ship still buffeted in a storm. Its revenues fell another 21 per cent last year, and things have not improved. In the early weeks of its new financial year same-floorspace sales are off 5.7 per cent.

Dick’s, by contrast, has the track record, deep pockets and overseas ambition to suggest it could be the answer to many of the British company’s challenges. A recovery is still not certain, but yesterday’s financial shot in the arm must improve the odds.

The yanks have shot, and JJB has scored.

Africa cements its place with the Brics

AFRICA is becoming the added “Bric” in the wall for big British businesses seeking high-growth markets. Drinks major Diageo, Scotland’s largest whisky company, has been just the latest company to trumpet this prediction.

Diageo said yesterday it expects growth in Africa to go beyond the current impressive 15 per cent, and that suggests it is not fanciful to think Africa could yet join Brazil, Russia, India and China (the Bric countries from many a powerpoint presentation in the City) as a major new growth market.

The middle-class aspiration that has fuelled the growth of western business earnings in the likes of Asia for a couple of decades now is gaining traction in Africa.

Banks, drinks companies, mobile telecoms companies are all beating a path to Africa’s door.