JJB battles on after posting £189m loss

THE full scale of retailer JJB Sports’ disastrous slide to the brink of insolvency has been bare as the company posted an annual loss of £189m.

It said too that its current trading was still being affected by the raft of bad publicity surrounding it, and that suppliers had refused to provide it with stock because of concerns that the business would go bust.

Wigan-based JJB, said that until the formal completion of a life-saving Company Voluntary Agreement later this month and then start of a new banking facility on June 1, it was unable to confirm its status as a going concern.

The CVA will see JJB settle the claims of landlords of about 140 closed stores and move from quarterly to monthly rent payments on about 250 stores, easing the pressure on cash flow.

JJB said it had suffered from the economic downturn, which had been compounded by a series of bad decisions by the previous management teams to reposition the business. Banking covenants were then breached, increasing further pressure on the company, it said.

Executive chairman Sir David Jones, the former boss of Next, : “The year to 25 January 2009 has been an exceedingly difficult one for JJB Sports.

“A series of bad business decisions taken by former members of the executive management team and the worsening economic environment brought the company dangerously close to insolvency.”

He said the bad decisions had included the move to take the group up-market by buying the Original Shoe Company and Qube. In the year to January the lifestyle businesses lost a combined £18.1m and were placed into administration in February.

Despite the company’s decline, Sir David said “significant inroads” had been made to revive the business. These included the CVA and the sale of the successful fitness clubs in March for £83m to former chief Dave Whelan.

“With our restructuring progressing very well, we now have the opportunity to revitalise JJB Sports as a focused multi-channel retail business, specialising in sporting goods and sportswear.”

JJB posted losses of £189.2m against a profit of £10.8m last year. Turnover fell from  £811.8m to £718.3m. Due to the company’s much publicised difficulties, the payment of a dividend was scrapped.

The retailer also published a trading statement today for the 16 weeks to May 17, which revealed that the business has continued to suffer as a result of its financial problems.

Group revenue was 42.1% lower than the same period last year. On a like-for-like basis the total revenue was 23.3% lower.

JJB said: We believe that the decrease in like-for-like retail sales is largely as a result of low stock levels, the negative publicity which has surrounded the company, and the current retail environment.

“As a result of our financial difficulties over the last nine months the company has had to exist with stock levels significantly below the previous year. Many suppliers have been reluctant to supply stock because of the lack of trade credit insurance and the widely held belief that the company was likely to go into administration.

“As the lead times between the ordering of product and its delivery can be up to six months we do not anticipate any significant improvement in sales until the 4th quarter of 2009.