JJB Sports executive chairman David Jones has described his turnaround attempt as “the biggest challenge I have ever had”, as the retailer posted a full-year loss of £189m.
Jones, who originally made his name by rescuing Next, said that JJB’s new management now has the opportunity to “revitalise the business” after creditors approved a company voluntary arrangement (CVA) and new banking facilities were secured.
The £189m loss was against an £10.8m profit last year. In the year to January 25, JJB’s retail sales fell 13.4 per cent and 6.9 per cent on a like-for-like basis. The period included the placing into administration of JJB’s loss-making lifestyle division, comprising Original Shoe Company and Qube.
Investec analyst Katharine Wynne believes a rights issue will be necessary to secure JJB’s long-term position.
“We question whether the ongoing £25m working capital facility – committed until September 2010 – will prove adequate,” she said. “We expect a rights issue
will be needed, but now a credible management team – pending a permanent chief executive – has been assembled we believe shareholders would be prepared to support it.”
Numis analyst Nick Coulter said: “Beyond the pivotal short-term considerations, a recovered JJB would offer a compelling upside.”
He said investors with an appetite for risk should “cast the rule over JJB”.
In the 16 weeks to May 17, total revenues fell 23.3 per cent as low stock levels hampered JJB’s performance. The retailer said that many suppliers had been reluctant to supply stock after its credit insurance was pulled because they were worried that the group would fall into administration. The stock situation, JJB said, would not improve significantly until the fourth quarter of this year.
Jones said that he was confident that JJB can re-establish itself and become a “destination store for everyone interested in sport”.
He added: “When I am satisfied we are firmly on the road to recovery and after we have appointed a new chief executive, I intend to become part-time chairman.”