JJB Sports posted a whopping £189.2million loss in its preliminary results for the 52 weeks to January 25, 2009. In further troubling news for the retail chain, group revenue for the 16 weeks to May 17 was 42.1 per cent down on the same period last year.
In an interim management statement released in May 21, JJB said that the decrease in like-for-like retail sales is largely as a result of low stock levels, the negative publicity that has surrounded the company and the current retail environment.
As a result of JJB’s financial difficulties over the past nine months, the company has had to exist with stock levels significantly below the previous year, with many suppliers 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. The company doesn’t anticipate any significant improvement in sales until the fourth quarter of 2009.
Sir David Jones, executive chairman of JJB, blamed a series of bad decisions by former members of the executive management team, which sought to take market share from JD Sports and Sports Direct, as well as the worsening economic climate, for bringing the company dangerously close to insolvency.
Disastrous moves included the purchase of Original Shoe Company and Qubefootwear to challenge JD Sports (OSC and Qube made a combined loss of £18million in the period to January 2009) and the attempt to match the trading philosophy of Sports Direct by selling mass-market brands and products at prices significantly lower than their original selling price.
Jones said these two ‘diversions’ from the product policy of the founder of the business, Dave Whelan, affected staff morale and caused confusion particularly within the company’s buying departments, retail stores and with customers, with the inevitable result of falling sales.
Says Sir David Jones: “Our 2008/09 results reflect the disappointing performance of JJB Sports as the business struggled to reposition itself in a declining retail environment, resulting in severe operational and ultimately financial difficulties.
“Since I became executive chairman in January 2009, we have made significant inroads to restoring the group’s financial stability – against all the odds – and we have initiated a strategic path to growth.
“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. I am confident that the executive management team we now have in place has the skills and conviction to deliver on that exciting potential, despite the challenging market conditions we expect in the months ahead. There is still much to be done, but we are determined to succeed and to serve the best interests of our customers, employees and shareholders.”