JJB Sports plc, the UK’s largest sports retailer, said the retail environment, particularly in clothing and footwear, continues to be very competitive and in order to meet this challenge, JJB has been operating a vigorous promotional campaign since October 2005. This has resulted in a more satisfactory level of revenue than had been achieved in the first half of the current accounting year, but at a materially lower gross margin.

However, JJB’s Christmas/New Year sale started at the beginning of the week commencing 19 December 2005 and the increased levels of revenue in both that week and the week commencing 26 December 2005, compared to the same two weeks last year, more than compensated for the reduction in the gross margin suffered in those two weeks.

Revenue by product category during the 22 weeks ended 1 January 2006, when compared to the same period last year, showed slight increases in all categories with the exception of footwear which was 2.6% lower; gross margins were lower in the clothing and footwear categories whilst margins in the other categories were similar to those achieved in the comparative period.

Total revenue from stores and health clubs for the 22 weeks ended 1 January 2006 was 2.3% higher than for the equivalent period last year; revenue from the operating units that had been trading for over 52 weeks (like-for-like comparison) was 0.4% lower than last year. The equivalent figures for the Christmas and New Year period (being the 6 weeks ended 1 January 2006) were an increase in total revenue of 4.0% and a like-for-like increase of 2.0%.

The combined gross margin for the stores and health clubs for the 22 weeks ended 1 January 2006 was 320 basis points lower than that in the equivalent period last year.
We currently expect pre-tax profits for the 52 weeks ending 29 January 2006, to be within the range of £32 million to £36 million, being lower than current market expectations. This range is based upon figures prepared under the International Financial Reporting Standards and takes into account the change in the basis of calculation of depreciation referred to in JJB’s 2005 Interim Report.

The level of revenue from JJB’s health club chain continues to be entirely satisfactory; total revenue for the 22 weeks ended 1 January 2006, was 54% higher than in the comparative period last year. At 1 January 2006, JJB operated 31 health clubs whilst at the same date last year, it operated 21 clubs. Total membership at 1 January 2006 was 121,100 whilst on 2 January 2005, the membership totalled 83,400 members.

During the second half of the current accounting period, JJB has continued the migration from small high street stores to superstores and has closed a number of its poorer-performing superstores. A total of 8 superstores (including 3 combined health clubs/superstores), have been opened during the 22 weeks ended 1 January 2006 and 10 operating units have been closed, bringing the openings for the 48 weeks of the current accounting period to 27 retail stores (including 10 combined units) and the closures to 26 retail stores. One more combined unit will be opened before 29 January 2006 and a further 12 combined units are planned for openings during the accounting period commencing 30 January 2006.

At 1 January 2006, JJB operated from 439 stores representing approximately 4.39 million square feet of retail selling space and included 193 out of town superstores, 109 high street superstores and 137 smaller high street stores including those operating under the “icon” fascia. This compares to 441 stores in operation at 31 July 2005. Further growth in superstores will be achieved during 2006 with plans in place to open 18 sites, including sites that will also contain health clubs.

Roger Lane-Smith, JJB’s Chairman, commented:-
“I am disappointed with the Company’s trading performance for the 22 weeks ended 1 January 2006.
Our performance has been hampered by strong retail competition in clothing and footwear and I expect these conditions to continue for some time. However, JJB remains focused on the sale of quality sports related products in its increasing number of superstores. JJB will continue to open more of the successful combined health clubs/superstores and with membership of our health clubs increasing, I expect further growth in this area. Despite the challenging trading environment, with these contributors to our full year profits, as well as potential benefits from the 2006 sports calendar such as the FIFA World Cup in June, I believe that JJB will achieve a better performance in the coming financial year than that achieved in the current year.”