Sports retailers may face a barrage of price cuts if Dave Whelan’s bid to take JJB Sports private is successful.
On Tuesday, Whelan, founder and chairman of JJB, ended months of speculation by admitting he is ‘seriously considering making an offer for the share capital of JJB Sports not already owned by the family’.
Robert Clark, research director of Retail Knowledge Bank, said: ‘There are significant margins in there and if you don’t have to pay dividends you can do other things. You can cut prices.’
He added: ‘Sports Soccer is a serious competitor these days that people tend to underestimate because it keeps a low profile.’ It is no accident, he said, that deep discounters in Europe such as Aldi and Lidl are private.
They are not answerable to stock markets about margins and profits and therefore freer to cut prices.
Clark said Sports Soccer has 117 stores and estimated that its turnover now exceeds£400 million.
Analyst Nick Bubb of Evolution Beeson Gregory said Whelan has become disgruntled with the City. Analysts took a dim view of JJB’s acquisition of discount department store group TJ Hughes. However, he said backers may wonder if Whelan, now in his mid-sixties, is ‘up for it’.
HSBC estimated that the funds required for the buy-out would be in the region of £360 million to £370 million.