Struggling sports retailer JJB Sports has tried to offset worrying news of big losses and sliding full-year sales this morning with the announcement of £30 million worth of new investment.
American retail group Dick’s Sporting Goods is to invest £20 million in new shares, with an option to take a further £20 million in convertible loan notes, while an additional £10 million will be generated by current shareholders IAML, Harris Associates, Crystal Amber and BMGFT exercising existing warrants, in an attempt to turn the beleaguered business around.
The scale of this task was set out today in the group’s full results for the 52 weeks ending January 29th 2012, which showed a revenue decline of 21.7 per cent and a loss before tax of £101.1 million.
Much of the decline in sales was as a result of JJB’s store reduction programme which has seen 41 outlets close during the first phase of the retailer’s company voluntary arrangement, yet underlying trading has remained weak with like-for-like sales (LFL) for the first nine weeks of the new year down 5.7 per cent.
Despite extensive attempts to make efficiencies and cut costs, gross margin rose just 1.3 per cent over the full-year period to 35.7 per cent, and in the nine weeks to April 1st LFL cash gross margin actually fell 24.9 per cent in monetary terms thanks to stock control measures.
Keith Jones, CEO of JJB, commented: “The 52 week period to 29 January 2012 has once again proven to be an extremely challenging time for the company. However, we believe that the investment package and strategic alliance with Dick’s will provide a real opportunity to accelerate JJB’s turnaround.”
As part of the new investment deal, at least one representative of Dick’s is expected to join the board of JJB, with Jones hailing the US-based business a “premier sporting goods retailer”.
Key supplier Adidas Group has also agreed to provide security for a two-stage loan of up to £15 million to fund the retailer’s store transformation programme, which has already got underway and the retailer claims that the enhanced store concept in Broughton Park, Chester is already seeing positive results.
Edward W. Stack, Chairman & CEO of Dick’s Sporting Goods, said: “We believe that JJB is a strong company with the potential to become a leading multi-channel sporting goods retailer both in Britain and throughout Europe.
“We look forward to providing the company with financial support at this crucial stage of its turnaround and to using our expertise in the U.S. market to help guide its growth efforts.”
Former CEO of JJB Christopher Ronnie was yesterday charged with three acts of fraud, two money laundering offences and two counts of furnishing false information by the Serious Fraud Office (SFO), after a two and a half year investigation by the government department.
In October 2010 the SFO announced that no charges would be brought against JJB or rival firm Sports Direct in relation to alleged fraud but investigations into individuals would continue.
Along with Ronnie, David Patrick Ball, accountant & joint beneficial owner of one of JJB’s suppliers Fashion & Sports Limited, was also charged with furnishing false information yesterday by Westminster Magistrates’ Court. Both men were released on unconditional bail.