JJB Sports has issued a profit warning after an aggressive stock clearance strategy hammered gross margin.
The sportswear retailer, which has marked its products down by up to 90% this month, said that pre-tax profit over the second half was likely to be lower than the £27.4 million achieved last year.
Over the six weeks to January 6 JJB said that total sales were up 2.5% but this was achieved at the expense of margin which was 400 basis points lower than the same period last year. However during the 23 weeks to January 6 sales rose by 1.9% on a like-for-like basis.
This is the second profit warning the retailer has issued in three months. It warned profits would below expectations after the England football team crashed out of the Euro 2008 competition in November.
JJB said in a statement: "The decrease in combined gross margin results mostly from the decision to clear a build up of non-current products in the retail stores and only partly from the economic landscape. JJB is determined to start its new financial year from February 08, with a much fresher stock package on which stronger margins can be achieved."
The board added that the retailer remained cautious about the year ahead due to the credit crunch but said that the business would be in a stronger position this year as it rolls out its store refurbishment programme and benefits from the results of a newly introduced staff bonus scheme.