Retailer JJB Sports said today that it’s been forced into ‘significant action’ after pre-tax profits tumbled 72% in the year to January 27, down to £10.8m. It’s now begun a major restructuring, which will involve closing down 72 of its 410 stores (presumably one for every percentage point drop in profits) with the loss of 8,000 jobs, and focusing more energy on its health clubs – which haven’t been as hard hit by the consumer spending slowdown.
At a time when high street retailers are getting increasingly jittery about their prospects for the coming year, this isn’t exactly going to calm the nerves. Most companies (with a few notable exceptions like the money-making machine that is Tesco, judging by yesterday’s results) are suffering from our current reluctance to shell out for things that we don’t really need – Ikea boss Anders Dahlvig and Bhs boss Philip Green are just two of the retailers to have complained that sales are well down this year.
On the other hand, most of JJB’s problems arose last year, before the credit crunch really hit home on the high street. The problem is that its fortunes are heavily linked to that of the England football team – which as we all know, has spent the last couple of years being a bit rubbish. When England makes it to a major championship, as they did in 2006, JJB can flog thousands of replica shirts and other paraphernalia. But last year, with no big tournament, sales plummeted. And given our dismal failure to qualify for Euro 2008, there’s presumably no prospect of the coming year being any better.
So what on earth can it do to survive? Well, the first step is clearly to close down its least profitable stores – currently ‘a huge drain on the business’, according to CEO Chris Ronnie - and become less reliant on football tournaments. Another major focus will be on training its staff, presumably in an attempt to make them slightly less sullen and uncooperative, and (ideally) at least slightly knowledgeable about sport and/ or sportswear. It’s a radical idea, but it might just work.
Ronnie was putting a brave face on things today, suggesting today’s action ‘represents a turning point for the Company’. But with sales down 3.5% in the seven weeks to Easter, spending low across the high street, and England players on the beach this summer, even the two Ronnies would face an uphill task to turn this situation around.