JJB shares slump as it warns of tough trading

28th September 2010

For the six months to the end of July JJB trimmed losses by 44% to £24m versus £42.9m last time, mainly due to a 14.4% jump in like-for-like sales.

The football World Cup in the summer helped improve sales. Even England’s early dismissal from the competition could not prevent sales being 13% ahead of those achieved by JJB during the previous World Cup in 2006.

Since the end of the half year to July, however, trading has been tougher, with sales more volatile as shoppers become more cautious with their spending against a backdrop of economic uncertainty. The company says it is now increasing promotions in an effort to lift sales.  

JJB insists it is continuing to make good progress with its three year turnaround. The firm narrowly averted administration last year thanks to an £100 million rights issue October 2009.  

The retailer’s spectacular fall from grace in recent years –  its share price has plummeted by 90% since the beginning of 2008 – partly reflects stiffening competition on the high street. It was also badly burnt during the financial crisis through the collapse of Icelandic bank Kaupthing, a lender to JJB.

While the trimming of half year losses is encouraging, the company’s admission that trading has become markedly tougher since half year end dented sentiment over the stock this morning, with JJB plc shares down nearly 11% or 1.17p to 9.83p at lunchtime.

The company’s downbeat comments on current trading might suggest wider difficulties on the high street. Trevor Green, director of equities at Henderson however urges investors to not read too much into JJB’s statement, pointing out that just earlier this month fashion retailer Next produced “highly robust” interim numbers.  

Green notes that Next did refer to the low sales growth outlook in its statement as “the new normal”.  “That means retailers are going to have to work extremely hard at differentiating their offering via price or product in order to get top line sales growth,” he says.

Green adds: “Undoubtedly in the uncertain times which we find ourselves one can expect the strong to get stronger and continue to take market share and the weak to get weaker. That makes for a very hostile environment for weak operators to turn their fortunes round.”

Leave a Reply

Your email address will not be published. Required fields are marked *