Chairman warns restructuring will not be quick or easy
The chairman of JJB Sports said it could take up to five years to turn around the retailer, after it came "perilously close" to collapse and annual losses ballooned to £181m.
"The restructuring of JJB will not be easy or quick and will most likely take three to five years," said Mike McTighe, a restructuring expert who was parachuted into the high street chain at the end of last year. "The retail environment is challenging, will remain so for some time and we face intense competition."
The new management team, which includes chief executive Keith Jones, sought to draw a line under a torrid three years at the Wigan-based chain which has seen three cash calls on investors, who include a foundation set up by Microsoft founder Bill Gates and his wife Melinda.
The retailer has twice restructured its stores, using a company voluntary agreement – a legal deal with landlords designed to slash rent costs. The most recent one, struck this year, has earmarked up to 95 stores for closure if their performance does not improve. Substantial costs associated with the shake-up pushed JJB to a pre-tax loss of £181m on sales of £363m in the year to 30 January.
McTighe said JJB has a "real chance of recovery" but added "this is the beginning of the hard work and not the end." The retailer plans to differentiate itself from rival Sports Direct by reinventing itself as an "authentic" sports chain selling equipment and clothing. It has been trialling a new look in a handful of stores and they are delivering sales 16% above average. McTighe said the chain's performance had met board expectations in the first quarter of the new financial year.
JJB has yet to recover from losses associated with the acquisition of two footwear chains in 2008 by former chief executive Chris Ronnie, who was sacked after it emerged his 29% stake had been seized by the administrators to Icelandic bank Kaupthing. McTighe said: "2010 was a difficult year for the company when longstanding, unresolved weaknesses and inefficiencies were exposed in a very challenging retail environment and the business came perilously close to entering administration."
Seymour Pierce analyst Freddie George said he did not expect JJB to break even until 2013: "Although the company is now on a much sounder footing, it will, we believe, be a long haul back to recovery." Shares in JJB, which has moved its listing to Aim, closed down 3p at 23.25p.