JJB fights against the run of the ball

31st October 2011

In what could be a classic triumph of hope over experience, investors who have poured some £180m in extra financing into sportswear retailer JJB Sports over the last two years now own a company worth £34m. Of the extra cash, only £12m remains in the balance sheet.

What happened to the money and to the share price? The cash went in restructuring (a polite term for slashing and burning around 20% of its high street presence.)  And back in early 2007, the shares were worth more than 20 times the present 11.6p  – and the quote is around an eighth of just a year ago.

Unveiling figures showing a gaping half year loss of £66.5m, in the 26 weeks to July 31, compared with a loss of £24m the same time last year, the group warned it "faces a number of critical trading periods" and possibly diving further into the red.

The Wigan-based group said trading conditions were worse than expected and remain "extremely challenging", and added that the losses were worsened by a huge sale to clear old stock and the costs of closing 41 stores.

The group, which demoted itself to the lower cost AIM market, says it faces a number of "critical trading periods", including Christmas, the January sale and next year's European football championships and Olympics, which possibly only leaves Easter as a non-critical period.

With one analyst predicting no return to the black for three years and a second reckoning on possibly no way back, what can the group with its "chavtastic" range of clothing and footwear do? 

It has already had heart-stopping moments leading to rent renegotiations. Some think there is nothing to prevent its relegation to the corporate version of the Blue Square Premier – its offer may simply not chime with today's consumers.

But the group sees the future in revitalised football related sales, appointing Ray Evans, formerly at Kitbag, as head of football merchandising. 

Could the beautiful game save it? Or is it red card time for investors?


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