“It’s the worst retail environment I’ve ever known but people would be brave to write off JJB. This is a business with incredible potential, but I have never seen a retail business with so many non-performing stores as when we took it over. We always said this is a long-term play.” So Chris Ronnie, chief executive of JJB Sports has said.
With banking in freefall, there couldn’t have been a worse time for JJB Sports to release interim results showing a pre-tax loss of £9.7m. Sales were down 5.6 per cent as the Wigan group slipped from a profit of £8.3m for the equivalent period in 2007. Both its fashion subsidiaries, Original Shoe Company (OSC) and Qube, lost money.
That was just the beginning. Amid a change of chief financial officers, confusion arose over whether a banking covenant with HBOS had been breached, compelling auditor Deloitte to conclude there were “material uncertainties about the company's ability to continue as a going concern”. On 8 October 2008, shares dropped to 12 pence, valuing the business at £28m.
With Icelandic investor house Exista, which with Ronnie paid founder Dave Whelan £190m for the controlling 29 per cent stake in June 2007, being forced into selling assets elsewhere, some were ready to call time.
But shares have rallied. Dialogue with the banks is constructive, says Ronnie: “They’ve been our bankers for years and they’re supportive of our plans. We’ve got the headroom to take the business onwards and upwards.”
The outlook became brighter when Sports Direct owner Mike Ashley, Ronnie’s friend and former employer, paid £3.4m to take his stake from 16 to 21 per cent. Is it significant that more than half the business is in friendly hands? If it came to it, would he consider a merger?
“No I wouldn’t, I don’t think there’s any need to. There’s no significance in the share thresholds. Is Mike Ashley a welcome investor? Absolutely. But the institutions are important, too, and they weren’t selling up.”
Ronnie plays down reports that Sports Direct is trading from ex-JJB stores and that bailiffs have been into stores. “We trade stores all the time. And yes, we didn’t rush to pay rent on shops we had closed.”
Ronnie believes the management team he has put in place can make the company work once consumers start to breathe life back into the high street. Phil Swain was made retail operations director on Ronnie’s arrival.
Of the refurbished ‘new era’ stores opened on Swain’s watch, Trafford Centre trading is up 30 per cent, with the worst performer still in “double-digit” growth. Revamping as many stores as quickly as possible – and opening more branches of £9.95 per month dry-gym MiFit – is the aim. Qube and OSC are expendable. “We always said they were strategic acquisitions. If the offer is right we’ll sell.”
Also in: November 2008
-
The audacity of hope
When the glossy brochures arrived outlining the scale of the investment that Manchester’s transport authorities were hoping to unlock, in return for a congestion charging scheme at peak times, the map in the centre of the brochure made Greater Manchester’s public transport system look like the London underground map.
-
The man with the plan
Michael Taylor meets Sir Howard Bernstein, the chief executive of Manchester City Council, and the man staking his reputation on the congestion charge plan.