Sports Direct turns up heat on struggling JJB

Sports Direct, the UK's biggest sporting goods retailer, has said the business model of its troubled rival JJB appears to be "broken", as it delivered a surge in profits which triggered one of the retail sector's largest ever bonus payouts for staff.

Some 2,000 employees at Sport Direct – which is controlled by Mike Ashley, the owner of Newcastle United – will share an average gross payout worth £43,860, with them receiving the shares over the summer of this year and 2012.

The barnstorming performance of Sports Direct is in sharp contrast to the travails of rival JJB, which suffered a loss of £181.4m last year.

Dave Forsey, the chief executive of Sports Direct, said that JJB had been discounting more aggressively over the past six months, as it is running its business based on cash generation, but he questioned the strategy's sustainability. He added: "They are working on lower margins [than Sports Direct] that are not sustainable." Mr Forsey added that JJB's business model "seems to be broken".

But JJB hit back, saying it is in a "three- to five-year turnaround and, as we said last week, the business is performing in line with expectations".

Sports Direct bucked the retail gloom by posting growing underlying profits by 24.9 per cent to £200.4m over the year to 24 April, which was ahead of its share scheme bonus target of £195m.

Mr Forsey said: "The staff incentive scheme acts a powerful tool to execute... on what we are trying to do with the business."

Sports Direct will staff 25 per cent of the share award this year and 75 per cent next year, which is equal to about 100 per cent of their salary over that period.

Sports Direct – which operates brands including Field & Trek and Donnay International, as well as stores in Ireland, Belgium, Holland and Slovenia – grew revenues by 10.2 per cent to £1.60bn. In the UK, its retail like-for-likes jumped by 6.6 per cent.