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Thursday, 30 August 2012

JJB Sports - Possible prepack or administration on the cards

Update:  Sports Direct have expressed an interest in buying parts of JJB Sports as the firm looks likely to go through a pre pack administration.  If a prepack does go ahead it is likely that there will be many closures and job losses.  Given the huge success of Sports Direct and the dominance that it will  have in the sportswear market, the OFT are likely to look into it.  Other suitors include JD Sports and the French company Decathlon.

JJB Sports has admitted that it is likely to need extra funds, which have not so far been forthcoming, to carry on with its turnaround plan.  As such, the firm has put itself up for sale with KPMG advising.

This is a backward step for the company that has seen it go through 2 CVAs to vacate poorly performing stores but it seems that the sales slide continues.  JJB Sports has been under serious pressure from the other retailers in the sector Sports Direct and JD Sports who seem to have the right product, at the right price, at the right time.

JJB Sports was once the largest retailer in the sports market.  It now has a stock market value of less than £10m.  The retailer added that in the six weeks to August 26 like-for-like sales have decreased by 3.3% and like-for-like cash margin has decreased by 9.5%.  Last year we blogged that the sales had dropped by 17%  so this trend needs to be reversed quickly if the company is to be saved.

So what does the future hold?

One likely outcome is that JJB Sports will sold in a pre pack administration or be put into administration to protect it from further creditor attacks.  The assets will be sold off and the best performing stores retained in a smaller company.

Some commentators may argue that the CVAs don't work as the business may fail.  However the extent of  the falling revenues are a sign of the market and the company's positioning not a flaw in the CVA process.

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