JJB Sports Plc, the U.K.'s second-largest sporting goods retailer, forecast a drop in earnings after cutting prices to clear leftover inventory. The company said second-half pretax profit will be “slightly below” the prior year's 27.4 million pounds ($54 million
JJB said it reduced prices by as much as 90 percent in December and January after a slowdown in consumer spending caused a buildup of inventory. JJB is continuing its aggressive clearance of non-current stocks over the remaining 3 weeks of the current accounting period and this is expected to further impact the gross margin. The company had said on Nov. 29 that it expected second-half profit to be similar to the previous year.
Current trading Total revenue for the 23 weeks to 6 January 2008, including that from both retail stores and health clubs, was 2.2 per cent higher than for the same period last year and includes a like-for-like increase in revenue (on operating units which have been trading for over 52 weeks) also of 2.2 per cent. For JJBs retail stores only (excluding health clubs), the increase in total revenue for that period was 1.2 per cent with a like-for-like increase of 1.9% across 384 stores. The increase in total revenue for the 23 week period has been accompanied by an increase in the combined gross margin of approximately 200 basis points.
Total revenue for the Christmas period of 6 weeks to 6 January 2008 shows an increase of 2.5 per cent, which includes a similar increase in like-for-like revenue, but was achieved at the cost of a combined gross margin which was approximately 400 basis points lower than that achieved in the same six week period last year The decrease in combined gross margin results mostly from the decision to clear a build up of non-current products in the retail stores and only partly from the current economic landscape.
Looking to 2008, JJB said it believes it will be in a stronger position as regards its product levels and ranges and will seek to implement a store refurbishment plan across selected stores to take advantage of the successful new in-store format as shown in the recent refurbishment of its Trafford Centre store. The company believes that it's future trading position will be further strengthened following the recent introduction of a significant retail staff incentivisation bonus together with the opening of its Training Academy. JJB will also continue with the extensive roll-out programme of its combined health clubs/superstores. However, the Board of JJB remains cautious about the outlook for 2008 in view of the escalating pressure on consumers finances.
Roger Lane-Smith, Non-executive Chairman of JJB, today commented:- “I am confident that under the direction of CEO Chris Ronnie, the whole Executive team is taking all the right actions to reinvigorate this business.”
