Tragic finale for JJB, the retail soap opera

It's been running since 1971, but after years of indifferent management and missed chances, this looks like the end, writes James Thompson

If JJB Sports made TV programmes instead of selling sportswear, the retailer would undoubtedly have been a world leader in soap operas with tragic endings. The final episode was all but aired on the beleaguered 180-store chain yesterday when it filed a notice of intention to appoint KPMG, the accountancy firm, as administrator within the next few days.

Its rival Sports Direct is poised to acquire up to half of JJB's stores and other assets out of a pre-packaged administration but there will be no happy ending for many of the Wigan-based chain's 4,000 staff, with about half set to lose their jobs.

Bizarrely, the cast of the soap opera that is JJB seemed to have included a late appearance from Mohamed Fayed, the former owner of Harrods. While it emerged yesterday that a Mohamed Fayed had acquired a 5.7 per cent stake in JJB late last week at cost of nearly £85,000, it was subsequently confirmed that this Mr Fayed was not the billionaire owner of Fulham.

Among the soap's more longstanding protagonists, Mike Ashley, the founder and deputy executive chairman of Sports Direct, played a key role in forcing JJB to admit defeat, after giving it a good kicking over the past five years. Neil Saunders, the managing director of Conlumino, the retail consultancy, said: "The harsh truth is that, in its current form, there is not much room for JJB in a market that has become far more competitive and crowded and where players like Sports Direct have been gobbling up market share.

"Sadly, JJB has compounded this problem with a positioning that is very unclear and not at all compelling to consumers."

But the real tragedy is that JJB has largely scripted its own downfall through chronic mis-management for much of the past decade, after its sales peaked at £934.3m in 2002. For example it embarked on the calamitous acquisitions of the footwear chains Qube and Original Shoe Company in 2007 and 2008, respectively, but both were put into administration in February 2009.

It also emerged recently that JJB owed HM Revenue & Customs more than £5m after incorrectly calculating VAT in its accounts, although the retailer insists it has now paid that liability.

The brutal truth is that successive JJB management teams had every opportunity to turn it around. Its shareholders and suppliers have pumped in more than £225m of funding since 2008. Its four biggest shareholders, left with egg on their face, are the Bill and Melinda Gates Foundation, Crystal Amber, Harris Associates and Invesco.

JJB also failed to capitalise on shedding scores of under-performing shops in two insolvency procedures – company voluntary arrangements – in 2009 and 2011.

Many have attempted to make Chris Ronnie, the chief executive from July 2007 to March 2009, the scapegoat for JJB's woes, but subsequent management teams have also failed.

Mr Ronnie's tenure was undoubtedly ill-fated and included the two footwear acquisitions, a going-concern warning from its auditors and the start of the collapse in its financial performance. For instance, JJB made a pre-tax profit of £38.5m in the year to January 2007 but it had tumbled to a £189.2m loss two years later.

But Peter Smedley, an analyst at Charles Stanley Securities, believes JJB's woes date back much longer than Mr Ronnie's reign. He said: "I still maintain that ultimately the impact of complexity upon complexity kicked in around 2002 with the purchase of TJ Hughes, the discount department store operator." At this time, JJB was still being run by its chairman Dave Whelan, who founded the retailer in 1971 after the former footballer suffered a career-ending injury.

Mr Smedley says: "JJB never upgraded the management team and professionalised the organisation at that time to deal with Sports Direct which had leveraged its market price leadership to embark on aggressive space expansion. They just relied on the buying and trading mentality of Dave Whelan." Mr Whelan exited his interest in JJB by selling a 29 per cent stake to Mr Ronnie's investment vehicle in 2007 for £190m.

Mr Smedley also points to JJB's clothing business, in particular, losing its way. This was not only to Sports Direct but also to discount clothing operators such as the big supermarkets and Primark. He said: "Until recently, JJB's footwear business had remained fairly stable but the clothing business contracted sharply from 2002 onwards." But Mr Smedley explained that even JJB's footwear offering came under pressure due to its inability to offer the sort of credible own-branded and secondary branded offering that Sports Direct had developed to combat adidas and Nike.

While JJB largely sealed its own fate, much credit still has to go to Mike Ashley, who founded Sports Direct in 1982. Part of Sports Direct's success had been its strategy of acquiring brands including Lonsdale, Slazenger, No Fear, Dunlop and Everlast, which have given it better margins and the flexibility to license its products globally with other retailers.

Over the coming days, Sports Direct is likely to acquire up to 90 of JJB's stores out of administration. However, it is unclear if the 470-store chain would trade them as JJB in the long term, and Sports Direct will probably face an inquiry by the Office of Fair Trading into competition concerns.

If Sports Direct does not bag JJB, Stafford Group, the retail-to-shipping conglomerate, is waiting in the wings.

However, whoever buys the remnants of JJB, the biggest beneficiary of its demise will be Sports Direct. This makes Mr Ashley's comments to analysts last year seem a fitting end to the tragic soap opera that is JJB. He said: "I'll finish off JJB first and then I'll move on to JD [Sports Fashion]."

JJB timeline

1971 Dave Whelan, a former Blackburn Rovers footballer, acquires a single store in Wigan to form JJB.

1994 The 120-store chain floats on the London Stock Exchange.

1998 JJB acquires the business of Sports Division to become the largest sports retailer in the UK.

June 2007 Chris Ronnie buys a 29 per cent stake in JJB for £190m.

January 2009 Sir David Jones, who had been a non-executive since 2007, becomes executive chairman.

February 2009 JJB's Qube and Original Shoe Company chains collapse.

March 2009 Mr Ronnie "dismissed" as chief executive. Mr Whelan acquires JJB's fitness club for £83.4m.

April 2009 JJB completes its first CVA enabling it to shut scores of shops and avoid collapse.

March 2010 Keith Jones, from Dixons Retail, becomes chief executive.

March 2011 Second CVA insolvency. Raises £65m from shareholders

April 2012 Dick's Sporting Goods invests £20m. Adidas provides JJB with a two-stage £15m loan

July 2012 JJB warns of "deterioration in trading" after disappointing Euro 2012 kit sales. Jones quits as chief executive.

Arts and Entertainment
The Doctor and the Dalek meet
tvReview: Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Arts and Entertainment
books
Sport
Diego Costa
footballEverton 3 Chelsea 6: Diego Costa double has manager purring
Life and Style
3D printed bump keys can access almost any lock
gadgets + techSoftware needs photo of lock and not much more
PROMOTED VIDEO
News
i100
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind the scenes to watch the latest series
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
News
i100
News
The slice of Prince Charles and Princess Diana's wedding cake and the original box from 29 July 1981
newsPiece of Charles and Diana's wedding cake sold at auction in US
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Law Costs

Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Day In a Page

The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Chosen to lead the women's wing of the ruling Zanu-PF, the wife of President Robert Mugabe appears to have her sights set on succeeding the 90-year old
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model of a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor
She's dark, sarcastic, and bashes life in Nowheresville ... so how did Kacey Musgraves become country music's hottest new star?

Kacey Musgraves: Nashville's hottest new star

The singer has two Grammys for her first album under her belt and her celebrity fans include Willie Nelson, Ryan Adams and Katy Perry
American soldier-poet Brian Turner reveals the enduring turmoil that inspired his memoir

Soldier-poet Brian Turner on his new memoir

James Kidd meets the prize-winning writer, whose new memoir takes him back to the bloody battles he fought in Iraq
Aston Villa vs Hull match preview: Villa were not surprised that Ron Vlaar was a World Cup star

Villa were not surprised that Vlaar was a World Cup star

Andi Weimann reveals just how good his Dutch teammate really is
Bill Granger recipes: Our chef ekes out his holiday in Italy with divine, simple salads

Bill Granger's simple Italian salads

Our chef presents his own version of Italian dishes, taking in the flavours and produce that inspired him while he was in the country
The Last Word: Tumbleweed through deserted stands and suites at Wembley

The Last Word: Tumbleweed through deserted stands and suites at Wembley

If supporters begin to close bank accounts, switch broadband suppliers or shun satellite sales, their voices will be heard. It’s time for revolution