JJB Sports, the struggling U.K. sporting-goods chain, said recent poor sales mean it is likely to breach some banking covenants. Business conditions have been “extremely challenging” and sales have remained below forecasts since the company last updated investors on Nov. 11, the company said.
The retailers added that that freezing weather currently in the U.K. will likely further hurt results. The company said it's likely to fail a covenant test on a 25 million-pound Bank of Scotland loan facility at the end of January.
“At this stage, with two months of important trading remaining before
the year end, covering the pre-Christmas and New Year sale periods, the
outlook for the full year remains uncertain,” said JJB in its statement.
“The performance of the six transformed stores continues to be
encouraging, with sales 11% above the company average and money margin
21% above the company average, measured in the period from 1 November
2010 to 28 November 2010.”
The company noted that at the time of publication of the company's half
year results, the Group's forecasts did not show any funding shortfalls
or breaches of financial covenants in the next 12 months, but as part of
their going concern assessment, the directors highlighted the
uncertainties inherent in the Group's forecasts if future trading was
not in line with expectations.
“In light of continued difficult trading conditions, the company now
believes that it is likely that it will breach certain financial
covenants in the £25 million revolving facility provided by Bank of
Scotland when they are next tested at the end of January 2011. The
company is actively engaged in constructive discussions with BoS and
their advisers in relation to the testing of these financial covenants
and more generally in relation to the future financing of the business.
JJB said it's exploring “further business restructuring options” and considering alternative financing sources.
