JJB steps up promotions as 'volatility' begins to bite

Click to follow
The Independent Online

JJB Sports yesterday revealed that increased "volatility" since the start of August had forced it to step up its promotions to boost sales, raising fresh concerns about the strength of the sports equipment retailer's recovery.

Following its half-yearly results, analysts at Investec said JJB remains in a "precarious" position, adding it was likely the retailer may have to seek an additional fund raising.

But the chain, which narrowly avoided collapse last year, touted "steady progress" in the half-year to 1 August, citing a jump in underlying sales, gross margins and a near-halving of its adjusted operating losses.

Keith Jones, who took the helm as chief executive of JJB on 1 March to lead a three-year turnaround, said: "Since the half year-end, sales have been more volatile. We have consequently taken further steps to drive autumn and peak season sales through increased promotional activity."

JJB said that like-for-like sales surged by 18 per cent from 2 to 29 August, including one week of its summer sale and a four-day Bank Holiday. In contrast, underlying sales only grew by 6 per cent from 30 August to 6 September.

Mr Jones said: "This demonstrates that the sales performance has responded positively to certain promotional activities but in the current climate falls back without effective stimulation." The UK's third biggest sportswear chain is running a "spend and save" promotion, where customers who spend £50 in store get a £10 voucher to spend before the end of October.

Shares in JJB closed down 14 per cent at 9.4p yesterday, the lowest level since May 2009.

While investors were spooked, JJB provided further evidence of its recovery since it completed an insolvency procedure to close loss-making stores and a £94m fund raising last year.

JJB said its like-for-like retail sales jumped by 14.4 per cent for the 26 weeks to 1 August, although these were flattered by a crippling shortage of stock last year.

Compared with the last football World Cup in 2006, the retailer said its like-for-like sales were up by 13 per cent. However, it said that sales of replica kit fell back after this summer's tournament in South Africa as a result of "football fatigue" and delayed kit launches.

Katharine Wynne, the analyst at Investec, described JJB's recent trading as "disappointing". She said: "The business remains in a precarious position, in our view. We see it as likely that JJB will need to come back to the market for cash," she said.

But a JJB spokesman said: "We keep things under review but there is no need to raise extra cash at the moment."

Furthermore, JJB touted a jump of 8.2 percentage points in its gross margin to 42.2 per cent over the half-year, partly due to less discounting.

On its ongoing retail operations, JJB reduced its adjusted operating losses by 47.1 per cent to £22.5m, compared with a £42.5m loss last year. Total revenues rose by 10 per cent to £184m.

In its latest signing, JJB completed its operating board by unveiling Debbie Robinson, a former director at The Co-op, as marketing director.