Shares of JJB Sports Plc plunged around 24 percent in the morning trade on London Stock Exchange after the British sports retailer said its 24 week like-for-like sales decreased 8.7 percent and cash margin decreased by 16.6 percent. JJB Sports also said it is in discussions with its strategic partners on potential requirement to accelerate funding for a turnaround.
Amid the continuing poor macroeconomic environment, the company sees significant reduction in future headroom on working capital facilities and financial covenants, in the short and medium term.
In its Annual general meeting update, JJB Sports noted that sales and cash margins have fallen materially short of expectations in the 24 weeks. The company attributed poor sales of football replica kits and product associated with the European Football Championships and the poor early summer weather for the decline.
On July 9, while announcing an 8 percent decline in 22-week sales, the company had noted that since the beginning of April, it has experienced a deterioration in trading performance against management expectation, particularly during May and June. JJB Sports’ shares had plunged in double-digit rate on the day of that announcement.
In April, the company had warned that there were material uncertainties facing the business which included the company’s ability to continue to implement its business recovery turnaround strategy in light of the macroeconomic environment and its stock profile.
“These factors were seen as critical to the achievability of the Group’s business plan, and were vital in maintaining sufficient headroom on its working capital facilities and financial covenants, but also important in determining the additional funding which had been expected to be required in the first quarter of 2013,” the company said today in its statement.
However, the actions taken by the company to mitigate the trading and cash shortfall did not meet the expectations and the company said its level of future headroom on working capital facilities and financial covenants will be significantly reduced. The company noted that this is likely to accelerate the timing of the additional funding required, which is dependent upon the trading performance of the business and the successful implementation of the management initiatives.
JJB Sports said its newly appointed Deputy Chairman/Chairman elect Bob Corliss is working to review ways in which its trading performance can be improved both in the short and medium term.
Corliss stated, “There is a lot of work to do, and we have hit the ground running. We are continuing to work collaboratively with our business partners to address the challenges faced by JJB.”
Further, JJB Sports said it has refitted 5 stores this year which have shown an increase in sales and cash margin. The results of its ongoing refurbishment program have been encouraging, yet the Board is reviewing the timing of the program in light of the deterioration in trading. The company added that it continues to work with its key strategic partners to refine the refit design and scope. JJB Sports shares are currently trading at 5.71 pence, down 1.80 pence or 23.92 percent in London.