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No end to JJB Sports financial woes

By FashionUnited

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Fashion

Sporting retailer JJB saw lower than expected November sales, putting it in position to breach the terms of its bank borrowings. Last year the company raised a £100m equity and renegotiated leases, but it wasn't sufficient to stave off its troubled sales.

The company said that was considering its options for restructuring or alternative sources of financing, though analysts said it might have trouble returning to the market to raise new funds, reported the FT.

Shares
in JJB’s fell 1.04p, or almost 18 per cent, to 4.74p on Thursday, capping a slide of more than 80 per cent in the year to date.The company’s market capitalisation, which peaked at £1.2bn in 2001, is now £31m.

JJB has been rolling out a store modernisation programme and the six stores already modified have shown sales 11 per cent better than the company average. But it would need a significant amount of bridge financing to roll out the programme to the rest of its 247 stores.

“They really don’t have the funds to develop the business,” said David Stoddart, an analyst with FinnCap. “It’s not just a question of getting through this covenant breach.”

Much of the £100m raised last October went to pay down the company’s debt. The likely breach in covenants relates to the company’s £25m revolving facility with Bank of Scotland, now part of Lloyds Banking Group, which is due to be tested in January.

JJB said it is “actively engaged in constructive discussions” with the bank, which in September agreed to waive a prior covenant test.

JJB has faced pressure from Sports Direct, which has been able to undercut on pricing, while another rival, JD Sports, has found success with more fashion- conscious consumers.

In March, JJB appointed a new chief executive, Keith Jones, after having been without a chief executive since the prior March.


Image: JJB Logo
Source: FT

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