A difficult 12 months of change for sports retailer JJB Sports has led to a loss-before-tax of £181.4 million for the firm, according to year-end results published today.
This is almost triple the amount of losses seen during the previous year, £67.3 million, but the retailer remains confident that its new strategy implemented since January will turn things around.
JJB was forced to seek a company voluntary arrangement, which was passed in March, due to consistently low trading. To date 18 stores in the retailer’s portfolio have been closed, with as many as 89 to disappear over a two-year period.
Results today show that revenue from its ongoing operations increased by 0.5 per cent like-for-like (LFL) in the 52 weeks to January 30th 2011 to £1.8 million, however this reflects a 14.4 per cent increase in the first half and a 1.5 per cent decline during the second six months.
Keith Jones, CEO of JJB Sports, commented: “The trading performance has been poor and consistently below expectations.
“Our adjusted operating loss for the period was £73.9 million. In addition, we had exceptional items of £108 million which included an impairment charge for goodwill of £92.6 million resulting in an operating loss of £181.8 million.
“Lack of capability and the weakness in buying disciplines and processes account in part for the underperformance.”
Jones also points to cash constraints during the second half which limited the company’s stock control, but since the end of the year the retailer has secured two fundraisings via shares and has renegotiated its credit facilities.
A major restructuring of JJB’s management, with a new Chairman, CEO and Chief Financial Officer, was a major part of its restructuring plan that it now believes is on track to deliver vast improvements to performance.
Despite the optimism of the management board, Chairman Mike McTighe has warned that this turnaround strategy may take as long as five years to be successful.
McTighe cautioned: “The restructuring of JJB will not be easy or quick and will most likely take three to five years. The retail environment is challenging, will remain so for some time and we face intense competition
“But the work undertaken over the past six months, together with the crucial support of all our stakeholders have given JJB a chance to survive and ultimately to prosper and I look forward to working with our management team to make this happen.”
Six stores were transformed during the year as part of a trial which has seen the retailer deliver sales 16 per cent above and gross profit 30 per cent better then the company average.
Over the next year 150 stores will be refitted or refreshed and another 50 will have work done during the 2012/13 period.
“The transformation required is significant but entirely achievable,” Jones added.
“The consistently better performances from our six transformed stores provide evidence and real encouragement; this is even more so when considering the potential impact of adding new product propositions and the benefits of colleague training programmes which have not been a factor in the performance so far.”
“However, if we are to win back old and attract new customers we have to change quickly and to invest.”
According to Jones the disappointing performance of the England football team during last year’s World Cup had a detrimental effect on trading, but with the turnaround strategy now underway the business should be ready to successfully capitalise on the London Olympics next year.