JJB shares slide after profits warning
SHARES in retailer JJB Sports have continued to slide after yesterday’s profits warning.
The Wigan-based chain slid a further 8% this morning to 7.36p after yesterday’s 17% plunge on the back of alerting the City that heavy promotions were hitting margins, and that sales growth over the last six weeks had been lower than hoped for.
Last year JJB narrowly avoided administration after a disastrous trading period. Some analysts fear the firm may have to launch another rights issue to strenghten its balance sheet as it strives to return to profit under its new managment team.
Altium analyst Philip Dorgan said: “We fear that it is going to get worse before it gets better, with the key Christmas weeks ahead of us and a damaged brand competing in a tough market, with many cost challenges in the new year. It is clear that a rights issue is needed.”
Last year JJB raised £100m through a rights issue after going through a CVA to shed onerous shop leases and selling its health clubs.
In yesterday’s trading statement the company said: “The board believes that current trading conditions are having, and will continue to have, a negative impact on its expectations for the full year (to the end of January).”
“The full year outcome remains heavily dependent on our performance during the important pre-Christmas and New Year sale periods.” In September, JJB, which has net debt of £16.6m, said Bank of Scotland had agreed to waive a test of its lending arrangements for last month.
