JJB Sports Plc (LSE: JJB): JJB Hoping For An Olympic Recovery

JJB Sports Plc, the Wigan based sports retail giant, has endured a torrid time over the past couple of years, but could the fortunes of the company whose catch line is, ‘serious about sports’ [ref] JJB Presentation, http://www.jjbcorporate.co.uk/pdf/20090521%20-%20JJB%20Sports%20plc%20-%20%20FINAL%20PRESENTATION.pdf [/ref] , be about to turn?

JJB have recently issued a trading update [ref] JJB Sports plc - Trading Update, http://www.jjbcorporate.co.uk/pdf/28012010%20JJB%20Sports%20Trading%20Update.pdf [/ref] , which announced that the like-for-like revenue during the 52 weeks to 24 January 2010 was down 28% on the previous year.  The past 12 months was not a run of the mill retailing period for JJB, as they had a major stock shortage due to supplier problems [ref] JJB Annual Report 2009 [/ref] , implemented a Company Voluntary Agreement (CVA), raised around £100m in capital and sold the fitness clubs to its former owner and founder Dave Whelan [ref] Disposal of Fitness Clubs Business, http://www.jjbcorporate.co.uk/pdf/26%20March%202009.pdf [/ref] . 

Adding to the investor pain, Sir David Jones has declared that, due to continuing issues with his health, he will be stepping down as its Chairman but will remain as a Non-executive director of the company.  John Clare, a retail veteran and former DSGi chief executive, will now take over as acting chairman.  JJB have also announced that 4 times Olympic Gold winner and broadcaster Sir Mathew Pinsent has been appointed as a Non-executive director of the company. [ref] JJB Sports plc - Trading Update, http://www.jjbcorporate.co.uk/pdf/28012010%20JJB%20Sports%20Trading%20Update.pdf http://www.jjbcorporate.co.uk/pdf/reports/annual_report_2009.pdf [/ref]

Still, filing what has happened into the history section, is there still hope for the JJB brand? Or could the events of the past couple of years mean long term woe for the company?

JJB Sports operate in a highly competitive market place which contains two very big rivals, namely, Sports Direct and JD Sports.  The demise of JJB in terms of performance started around 2007 when David Whelan, sold his 29% holding in the sporting goods firm for £190m to Icelandic financial group Exista and Chris Ronnie [ref] JJB founder David Whelan sells up, http://news.bbc.co.uk/1/hi/business/6736431.stm [/ref] , a sports retailer who has previously worked at Umbro and Sports Direct. 

Under Chris Ronnie’s leadership, JJB tried to move its core product towards the aspirational end of the sports market targeting JD Sports position, leaving Sports Direct (a company Chris Ronnie had previously worked for [ref] Chris Ronnie's career so far, http://www.manchestereveningnews.co.uk/news/business/s/1099335_chris_ronnies_career_so_far [/ref] ) to clean up the value end of the market.  JJB had failed to reach the top end of the market while the value customers deserted the brand, which left it in limbo without a clearly defined segment of the market. 

Going forward, JJB aims to differentiate itself by going back to its roots dating back almost 30 years and concentrating once again on becoming a traditional specialist sports store providing, clothing, footwear, accessories and equipment that the sports participants require.  Clearly defining their segment and refocusing on their customer needs may give a reborn JJB a fighting chance of recovery in a market alongside their big rivals, with JD Sports appealing towards the fashion and leisure market [ref] JD Plc Annual Report, http://www.jdplc.com/docs/JDaccounts2009.pdf [/ref]   and Sports Direct towards the discount mass market generic end of the sector.  Sports Direct, who had net debt at year end £431.3m [ref] Sports Direct Annual Report,  http://www.sports-direct-international.com/library/AnnualReport2009.pdf [/ref] , have recently been the focus of a BBC documentary [ref] Inside Out North East and Cumbria - Mike Ashley Uncovered: An Inside Out Special, http://www.bbc.co.uk/iplayer/episode/b00qnvd1/Inside_Out_North_East_and_Cumbria_Mike_Ashley_Uncovered_An_Inside_Out_Special [/ref] , which was certainly no glowing reference [ref] BBC Inside Out Lifts the Lid on Mike Ashley's Sports Direct Empire, http://www.newsonnews.net/business/1790-bbc-inside-out-lifts-the-lid-on-mike-ashleys-sports-direct-empire.html [/ref] , and comes at a time when it is about to challenge price fixing allegations [ref] Sports Direct and Newcastle United owner Mike Ashley in fraud inquiry, http://www.guardian.co.uk/football/2009/sep/10/mike-ashley-faces-fraud-investigation [/ref] brought to the surface by JJB who have claimed immunity. 

JJB operate a multi channel approach to retailing which includes over 250 stores [ref] JJB Presentation, http://www.jjbcorporate.co.uk/pdf/20090521%20-%20JJB%20Sports%20plc%20-%20%20FINAL%20PRESENTATION.pdf [/ref] mainly located in prime high street and out of town locations.  One area of the business that has been underperforming is its internet operation, but the company has seen an improvement in its internet sales with January 2010 revenue up 28% on its comparative figure from 2009. 

The 2010 World Cup could be the first catalyst for the JJB Sports recovery and the event that rekindles the British love affair with visiting a traditional ‘sports store’.  Through the sale of replica shirts and associated products, JJB could benefit from a surge in revenue. The company is already taking a healthy number of pre orders for its replica shirt launches.  Big sports brands such as Nike, Adidas, Umbro and Reebok will be aiming for maximum media coverage, so JJB as a supplier of high quality, branded sports and leisure goods could benefit. 

Having spent a number of years in management during the 90’s and early 2000 in a previous career with JJB Sports, and still maintaining an interest in the business, I would not hesitate to state that the majority of its current day store staff, management and field teams are dedicated to the JJB cause. This should support the strategy put in place by a retail legend in Sir David Jones and the management team he has hand picked to deliver the vision, which includes a new CEO in Keith Jones [ref] JJB Sports plc appoints Keith Jones as Chief Executive, http://www.jjbcorporate.co.uk/pdf/CEO%20Appointment.pdf [/ref] , the current Retail Group director at DSGi. The directors' target price for JJB shares will presumably be around 80p, as that would trigger a £4.2m windfall [ref] JJB directors set for £4.2m windfall, http://www.iii.co.uk/articles/articledisplay.jsp?article_id=10056857&section=Markets [/ref] for their efforts.    

During my time with JJB, the company did concentrate on specialist sports products in addition to the mass market stock and it was amazing how the basket value increased as a result.  Customers would come in for a tracksuit and would pick up additional products such as, yellow dot squash balls, cricket pads, football studs, racket grips and even treadmills on some occasions! Having a host of complimentary specialist accessories, equipment, textiles and footwear in order to maximise the customer spend per head could well prove beneficial once again, as JJB increases their range of ‘sports’ goods [ref] JJB Presentation, http://www.jjbcorporate.co.uk/pdf/20090521%20-%20JJB%20Sports%20plc%20-%20%20FINAL%20PRESENTATION.pdf [/ref] on display at its stores. 

Sports retailers not only benefit from the seasonal boom periods such as, back to school, Christmas, Easter, but also have a calendar full of sporting events peppered throughout the year to capitalise on.  With JJB set to be fully stocked by April 2010 [ref] JJB Sports plc - Trading Update, http://www.jjbcorporate.co.uk/pdf/28012010%20JJB%20Sports%20Trading%20Update.pdf [/ref] , in time for Easter and the World Cup, 2010 could be a transformational year. Having set the foundations for recovery, the trading update in 12 months time may tell a different story. The City will certainly be hoping to see a profitable JJB leading into the 2012 Olympic Games.