Blog: Leonie BarrieSporting contrasts

Leonie Barrie | 26 September 2008

The viability of one of the UK’s most popular sports retailers was called into question today after auditors to JJB Sports warned that the company could go under.

Concerns about the firm’s financial situation centre on claims that it breached a banking covenant and may breach others later in the year, and that it has recently negotiated an emergency GBP20m bridging loan facility. The group has rejected the allegations but even so, in a market already jittery by events in the world’s financial sector, shares slumped 40% to 62.75p in early trading this morning.

Compounding the worries was the retailer’s unexpected slump to a GBP9.7m half-year loss from a profit of GBP8.3m a year earlier. Sales were down 5.6% to GBP344.7m. JJB also took the surprise step of scrapping its first-half dividend.

JJB has been trying to reorganise its business, and earlier this year shed 800 jobs and closed down 72 loss-making branches. It is also trying to improve its margin by developing its own brands and adding new types of sports clothing, as well as reducing its dependence on sales of replica football shirts.

Its fortunes compare markedly with those of rival retailer JD Sports, which earlier this week posted a 54% jump in pre-tax profits to GBP12.4m with like-for-like sales up 5.8% for the 26 weeks to 2 August.

JD targets sports and fashion conscious teenagers who are not only largely immune to the effects of the credit crunch, but whose seemingly insatiable appetite for trainers has helped the retailer stay one step ahead.

 


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