Struggling JJB ‘out of intensive care’

Author: By Kelly Macnamara, Press Association

JJB saw a year-on-year increase in losses of 189 per cent for the six months
to 26 July as stock shortages hurt sales and it tried to get back on its
feet with restructuring and refinancing efforts.

The company narrowly avoided administration thanks to a deal with landlords
and said today that recent sales figures were showing signs of improvement.

Executive chairman Sir David Jones said he had “aged 25 years” as the firm
struggled in the first half of the year.

“We are still alive and we are still kicking,” he said.

The 246-store company is in the process of a wide-ranging “serious about
sport” turnaround involving a focus on equipment rather than fashion and
using partnerships with big name brands.

Sir David said the Wigan-based company was “out of intensive care but it is
probably in recovery”.

But there were signs that the recovery plan remains touch and go as today’s
report said JJB could still resort to further asset sales, shareholder
fundraising or business restructuring should it fall into difficulties again
in the future.

It stated that while the firm believes it is able to continue trading and will
meet its financial obligations for the foreseeable future, “relatively small
variations” in the assumptions underlying its forecasts could lead to
funding shortfalls or a breach of its banking facilities.

“The directors have concluded that these conditions represent a material
uncertainty which may cast significant doubt upon the group’s ability to
continue as a going concern and therefore the group may be unable to
continue to realise assets and discharge liabilities in the normal course of
business,” JJB said.

The company said it has secured £10m in additional financing from its lender,
Bank of Scotland, while its loan terms have been relaxed.

But this is only a working capital facility, allowing the firm to rebuild
stock levels but not available to be invested in its turnaround plans.

Suppliers have been reluctant to deal with the firm following its high profile
troubles and Sir David said stock levels would not be back to normal until
the first quarter of next year.

The firm drew hope from an upturn in trading since the end of the first half,
with like-for-like sales down 37 per cent in the four weeks to 23 August,
moving to a 28 per cent decline in the following four weeks.

Sir David said JJB would also benefit from a slew of sporting events –
including the football World Cup next year and Olympic Games in 2012.

“Every major sporting event has to be free advertising for JJB,” he said.

And he vowed that JJB would not imitate its rivals in the high street
sportswear market.

“JJB is not a fashion retailer like JD Sports and we are not going to be a
discounter,” he said.

The firm is now planning to cater more for “sports enthusiasts, runners,
people who want to keep fit”.

Stores will be divided into sections related to different sports as well as
gym and fashion areas.

JJB hopes to capitalise on the involvement of brands in staff training and
open days.

It gave the example of the Birmingham half marathon next month. Before the
race, visitors to stores can have their technique scrutinised by Adidas and
Nike representatives.

“We have a gap that we are going to fill and I think that gives us a
marvellous opportunity because no one else is doing it in a national way,”
Sir David said.

Earlier this month JJB said it had blown the whistle to the competition
watchdog on alleged cartel activity in the sports retail market and the
firm, along with Sports World owner Sports Direct International, is now
involved in a Serious Fraud Office (SFO) investigation.

Today JJB said the SFO has confirmed its inquiries were focused on “the
activities of certain individuals” rather than the company.

It also stressed that it would be protected from prosecution because of its
immunity under the Office of Fair Trading’s leniency programme for
whistle-blowers.

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