JJB profits warning adds to retail gloom

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The Independent Online

JJB Sports rounded off a dismal week for the retail sector yesterday by admitting that its profits would miss City expectations after it was forced to start its clearance sale early.

The group followed Woolworths, House of Fraser and Ottakar's in bringing forward its post-Christmas trading statement to comply with the recent Financial Services Authority edict that retailers must not delay informing investors if sales disappoint. It was JJB's second profits warning since the summer.

JJB, which also owns a chain of health clubs, revealed like-for-like sales had fallen by 1.6 per cent over the six weeks to 2 January. Its decision to start its annual sale on 13 December hit its bottom line, and gross margins for the 23 weeks to 2 January plunged 160 basis points.

It warned profits before tax and amortisation for the year to 30 January would be between £61m and £64m - some 10 per cent lower than the consensus forecast. Despite the warning, shares in the group rose 11.5p to 201.5p on speculation that it could become the retail sector's next bid target. Last autumn, JJB was briefly in talks with Cinven, the private equity group, about a mooted 250p-a-share bid.

But several analysts cast doubt on the likelihood that a takeover offer would emerge. Iain McDonald, at Numis Securities, said: "If the market is looking for a bid to provide a 'get out of jail' card, then it may well be disappointed." He said the company's independent directors turned down an indicative 220p-a-share buyout offer from JJB's chairman, David Whelan, in early 2003. Since then the company's profits have dropped by one-third.

David Greenwood, the finance director, said Mr Whelan, who owns 40 per cent of JJB, was "still heavily committed to the business", dismissing suggestions the Wigan Athletic football club owner would seek to take the company he founded private.

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