Price wars halve profits at JJB Sports

JJB Sports admitted it had failed to take its main rival Sportsworld seriously enough as it revealed a near halving of profits last year and warned there was no end in sight to the price war that has hammered its margins.

The sports retailer, which also owns fitness clubs, sought to draw a line under years of pain for investors, insisting it had turned the corner. But it acknowledged its days of sky-high margins were over. Shares in JJB slumped 5p to 176.5p despite the group's decision to hold the dividend. Perennial bid speculation supports the stock.

Roger Lane-Smith, the chairman, said: "JJB made a familiar mistake of thinking its position was unassailable. Sportsworld [its biggest competitor] emerged seemingly from nowhere and we should have taken them more seriously than we did in their early days." Sportsworld, owned by Mike Ashley, recently overtook JJB as the UK's biggest sportswear retailer by turnover.

Pre-tax profits at JJB in the year to 29 January were £33.7m, down from £62.5m the previous year on revenue down 4 per cent at £745.2m. Underlying sales fell 4.3 per cent. A decision to slash prices to protect its dwindling share of the sportswear market meant gross margins across its stores fell sharply in the second half of the year compared with the first six months.

Tom Knight, the chief executive, warned the retail business would continue to make lower margins for the foreseeable future. The group, which is still fighting a £6.7m fine handed down by the Office of Fair Trading for colluding over the price of replica kit, increased its provision for the fine by £1.9m to £3.9m. It takes its fight to the Court of Appeal next month.