Price-cutting takes toll at JJB

SPORTSWEAR chain JJB Sports became the latest retailer to warn of deteriorating conditions on the High Street today when it admitted that trading was very difficult.

The company reported a sharp drop in turnover for the year to the end of January and profits down sharply from £90.5m to £63.3m on the back of a 17% fall in revenue to £773.3m.

Chairman David Whelan, also the company's largest shareholder, admitted: 'Trading conditions are as difficult as any I have known for some years.'

He said consumers were not spending as much money on the High Street as they had in the past and this was fuelling competition among retailers for their share of the shoppers' budget. JJB said it was struggling against cut-price competition from discount retailers and supermarkets.

The year-to-date comparisons are all the more alarming because results a year ago were also considered weak after a 5.7% drop in sales. And the decline has continued into the current year with JJB sales in its core business down 1.2% in the 10 weeks to 10 April, even when the effect of new and closed stores was taken out.

JJB is placing a great deal of importance on the development of its health club division ? some 18 new outlets will be opened during the course of the year, taking the total to 39 by early 2006. The company will invest some £60m in the business as a whole this year, the majority of this in the health clubs operation. The 24 clubs already in service have 100,000 members and JJB is planning for a ten-fold increase in subscriptions.

The company's plans envisage 200 clubs in total. Whelan dismissed suggestions that the health clubs market was saturated with rival operators, insisting that the company's £20-£35 a month subscription compared more than favourably with the £50-£60 charged by rivals.

Whelan added: 'We have to recognise that it's a very competitive market and we will do what we have to to compete.'

Today's results will do little to dampen bid speculation that has continued since last year. Takeover talks with private equity outfit Cinven fell through in October and there are no other discussions in progress.

But analysts believe that renewed interest is not far away ? Whelan himself tried to take JJB private in 2003. The board was not prepared to support his 220p a share indicative offer. At 215p today, 2p adrift on the news, however, shareholders may be hoping for renewed bid interest. The current share price values JJB at £497m. Investors, meanwhile, are to get an unchanged full year dividend of 10p, following today's decision to hold the final dividend at 7p a share.