JJB Sports is getting to grips with its financial and management difficulties, but can it carve out a new position in the sportswear market?
This week, the first signs that sportswear group JJB Sports might extricate itself from its financial troubles and management upheavals emerged as the company outlined plans for its long-term future.
After finalising a deal to sell its 54 fitness clubs to JJB Sports’ original founder Dave Whelan for £83.4 million, the group has also proposed plans to get out of the leases to 140 closed stores, via a Company Voluntary Agreement (CVA), and renegotiate rent payments on a further 250 shops.
The group is hoping the end result will be a 250-strong chain of shops which it will reposition as a “proper” sportswear retailer under its “Serious about Sport” strategy, the idea being that this will give it a genuine point of difference from its two big rivals, Sports Direct and JD Sports Fashion.
Strategic development director Peter Williams, who joined the troubled group in January, explains the thinking behind the strategy. “JD Sports is more about the clothes you wear to the wine bar to talk about sports,” he says. “It’s executed well, there are good brands and it’s a very clear offer. Sports Direct is very discount-oriented and that is also a very clear offer. JJB Sports is a bit lost between the two. There’s a real opportunity for a national sportswear and sports equipment chain. It will be the place to come if you play tennis, darts, cricket, football or whatever.”
JJB Sports’ “Serious about Sport” strategy is not new. It was put in place at the end of 2006 by then chief executive Tom Knight. However, it failed to make much headway, and at the time the group was preoccupied with a price war with rival Sports Direct. The strategy was abandoned when Chris Ronnie joined as chief executive in June 2007. His focus was on pursuing a similar model to Sports Direct, buying and acquiring licences for brands and using them as own label to gain margin.
Ronnie also tried to go head to head with JJB’s other big rival, JD Sports Fashion, which had carved out a convincing position in the sports fashion market helped by its Bank and Scotts chains, and so JJB bought the Original Shoe Company and Qube chains in December 2007 and May 2008. However, the two chains went into administration in February after a shocking performance.
Getting serious The “Serious about Sport” strategy makes sense but the group will have work to do if it is to make it work. Williams acknowledges there are elements which do not fit the concept. “You go into the stores and there are TVs showing Britney Spears videos and they are selling Hello Kitty product. The ‘good’ product is there but you can’t necessarily find it.”
Williams is keen that the company leverages its relationship with its big brand partners Nike, Adidas and Puma, but says there are unlikely to be any major changes in the brand portfolio. “The brands are very suppor-tive because they think the concept is a good opportunity,” he says. “We’ll continue to develop our own brands like Champion and we’ve got an open mind about other brands.”
However, he denies that this strategy will mean chasing a radically different customer base. “We’re not going to shrink our target market,” he says. “I don’t think the customer will be that different. Most people have some interest in doing sport or activity.”
However, some argue that despite chair-man Sir David Jones, and Williams’ good retailing pedigree, the business will have to augment its management team. One sportswear operator says: “They need to concentrate on being the performance sports store. There are no sportswear people at the company.”
Others say that Whelan, who will pursue his own “Serious about Sport” strategy with the 54 fitness clubs - which have shops attached - he bought from JJB Sports, is better positioned to make a successful business. Whelan’s chain will be rebranded to DW Sports Fitness.
Nevertheless, before JJB Sports’ vision can become a reality, it will have to win over landlords, who on April 20 will vote on its proposals for a CVA. But even with a favourable outcome, the future will be tough.
There is still the matter of who will take control of collapsed bank Kaupthing’s stake in the company, put up for auction this week.
As another sportswear boss says: “Whatever happens, Mike Ashley will be waiting in the wings to make life as difficult as possible for both JJB Sports and Whelan.”