JJB admitted today that it has forced to call in the administrators at its Lifestyle division, which consists of the Original Shoe Company and Qube subsidiaries. Between them these two chains have nearly 80 stores in the UK, so about 800 jobs could be under threat if administrators KPMG fail to find a buyer. But the bigger picture is that JJB needs to buy some time to renegotiate its borrowing arrangements – unless it strikes a new deal with its lenders by Saturday, according to the Times, the whole business may end up in administration…
According to a JJB statement this morning, the Lifestyle division ‘continues to trade at a substantial loss’ – it’s likely to lose about £15m this year, propelling the group as a whole to a loss of up to £10m. And despite spending the last few months ‘reviewing its options’ (which tends to be corporate-speak for ‘trying to flog it’), JJB has failed to turn a ‘preliminary approach’ into a concrete offer. It said today that the board ‘remains hopeful that a third party may become interested in acquiring the businesses’ – but hopeful isn’t the same as optimistic.
This week had actually started pretty well for JJB. Yesterday its shares rose by more than 50% (admittedly from a measly 8.25p to a marginally-less-measly 12.75p), following reports that it was close to a sale of its profitable fitness clubs division. JJB confirmed today that it has received ‘a number of non-binding indications of interest’. It didn’t say how much money it expects the sale to raise, but the reported price of £55m would be enough to pay off most of the group’s outstanding £60m debt (although it wouldn’t free up enough cash to solve its deeper-seated issues).
One possibility, according to reports, is that JJB founder Dave Whelan might be interested in buying back the fitness clubs division. Whelan seems to have sold up at exactly the right time back in 2007 – but he must be horrified to see what a mess the business is in just 18 months or so later. At board level, JJB has already been forced to get rid of CEO Chris Ronnie after it emerged that he’d lost control of his 27% stake to failed Icelandic bank Kaupthing, and on the high street, its sales have been dwindling rapidly. With the stock having lost 96% of its value during Ronnie’s tenure, Whelan would certainly be buying back his company at a healthy profit...
In today's bulletin:
HBOS and RBS chiefs say sorry for ignoring risks
JJB calls in the administrators after retail shoeing
Ed makes a Depressing Balls-up
Harriet Harman: No more sexism in the City
Editor's blog: Putting the world to rights in Portmerion