JJB takes another hit as sales fail to take off

More trouble for JJB Sports: the Wigan-based retailer saw its (already battered) share price plunge by almost a quarter this morning, after releasing its latest sales figures. Like-for-like sales are up 13% for the year to date - but given how appalling last year was, and given how much money it's been spending on promotional activity, that's pretty limp, to say the least. And it's just the latest in a string of bad results dating back to 2008. Could the future of JJB could be hanging by a (polyester) thread?

Following losses of £65.2m last year, JJB has made a raft of changes designed to persuade consumers that it’s a proper sports shop, as opposed to being just a Saturday afternoon hang-out for blinged-up teenage boys. The company has changed its logo to 'Serious about Sport', and tried to make its stores more sophisticated with a new, classier colour scheme. It's also revamped its management team, with new trading director Kate Hayes the most recent addition.

Earlier this year, JJB only just managed to stay afloat by cutting a deal with its landlords and convincing its main lender, Bank of Scotland, to waive a covenant test - all so it would have enough cash to cut its prices and tempt those fickle punters. But this has only had a limited effect on the top line - and it meant margins fell by 37.6% in the third quarter, ‘significantly’ below analysts’ expectations. As a result, broker Numis Securities has actually lowered its full-year forecast for the retailer from a £29m loss down to a £42m loss. Ouch.  

Understandably, JJB sounds pretty nervous about the rest of the year, saying only that it ‘remains heavily dependent on our performance during the important pre-Christmas and New Year sale periods’. But the reality doesn’t look good: consumer confidence, particularly in the market it’s aiming for, remains low – and with that VAT rise scheduled for January, margins are likely to be squeezed across the high street. So getting JJB back into the pink could be an uphill task

As a further blow to its bottom line, it's also been handed a £445,000 fine by the Financial Services Authority relating to that shock loss in 2008 - the watchdog ruled that it had failed to disclose the extent of its struggles to investors in the run-up to its interim results in September 2008. On the plus side, that does at least draw a line under the various investigations it's been subected to lately (the Serious Fraud Office dropped a probe into alleged collusion by JJB and Sports Direct in mid-October). So that’s a silver lining - albeit a very thin one.