The Investment Column: JJB Sports keeps up the pace

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The Independent Online
JJB Sports, possibly the best managed of the specialist sports retailers to list in recent years, boasts an extraordinary record of earnings and share price growth. Over the past five years it has failed to grow earnings by more than 40 per cent just once.

Its share price has responded by rising in a more or less straight line from flotation at an equivalent of 76p in 1994 to yesterday's close of 504p, up 5p and close to an all-time high. Interim figures yesterday unveiled an impressive doubling of pre-tax profits to pounds 14.0m with sales 60 per cent ahead to pounds 88.6m and earnings 110 per cent higher at 10.6p a share. Thanks to improving economies of scale as the chain is enlarged, JJB's return on sales improved from 13.1 per cent to 16.1 per cent.

JJB is rolling out its format at an impressive lick, adding 26 stores over the past year to a total of 186 and stating its intention to open another 50 during 1998. Despite that demanding programme, the balance sheet remains ungeared with net cash of pounds 10.8m. Cash flow per share continues to run ahead of earnings, always a good sign that profits are real.

The explosion of sports shops has been one of the remarkable retailing phenomena of the 1990s and anyone who has ridden the share price rises of JJB and peers such as Blacks Leisure will worry that the good times cannot continue. Certainly, competition is mounting from the likes of the supermarkets and growth in demand must eventually revert to the trend of consumer spending as a whole.

That said, JJB's earnings are expected to grow by more than one-third both this year and next. So a prospective PE ratio of around 20 is not unduly expensive.

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