JJB Sports chairman Mike McTighe has warned the sports retailer’s turnaround will take up to five years as losses before tax almost tripled to £181.4m in its full year to January 30.
McTighe said: “The restructuring of JJB Sports will not be easy or quick and will most likely take three to five years. The retail environment is challenging, will remain so for some time and we face intense competition.”
JJB’s adjusted operating loss for the period was £73.9m. The retailer had exceptional items of £108m which included an impairment charge for goodwill of £92.6m, resulting in an operating loss of £181.8m. JJB said “lack of capability” and the weakness in buying disciplines accounted in part for the underperformance.
Sales were up slightly from £361.1m to £362.9m. Like-for-like sales in the period rose 5.9%.
It followed a strong first half when like-for-likes were up 14.4%, and the business benefitted from the re-stocking of the business following the previous fund raising and the impact of the World Cup.
Like-for-likes in the second half fell by 1.5%. During the second half re-stocking was not effective as funds were constrained and “the business was unable to take in the stock required to support the sales forecasts”. As a consequence, the business was on the brink of administration.
The retailer’s gross margin decreased by nearly 4% to 34.4% for the full year which it said was down to poor stock availability and its highly promotional sales initiatives during the second half.
McTighe said the financial restructuring was completed on schedule by the end of April and while the sales environment remains challenging, its prudent controls mean that its performance in the first quarter has met the board’s expectations.
Since the end of its year the struggling retailer has secured two capital fund raisings of £96.5m a CVA enabling it to close 43 stores. It has already exited 18 stores.
The capital will be invested in refurbishing the retailer’s store portfolio. It revamped six stores last year which it revealed are out-performing the rest of its portfolio, with sales 16% above the company average. It plans to refresh or refit a further 150 stores in its current year and a 50 in 2012-13.
McTighe said: “This is the beginning of the hard work and not the end. But the work undertaken over the past six months, together with the crucial support of all our stakeholders have given JJB a chance to survive and ultimately to prosper and I look forward to working with our management team to make this happen.”