JJB Sports plc reported retail sales at its ongoing businesses of £361.1 million ($570.2mm) for the 53 weeks ended Jan. 31, 2010, down 22.6% from £466.6 million ($849.7 mm) in the 52 week period ended Jan. 25, 2009. Comp store sales during the period declined 27.3%.


The British retailer said its gross margins declined 890 basis points to 38.4% from 47.3%, leading to an operating loss of £64.9 million ($102.5mm), compared to a loss of £111.9 million ($203.8mm) a year earlier.

When including discontinued operations, revenues reached £372.5 million ($588.2mm), down 42.5% from £647.8 million ($1.18bb) in the comparable year ago period. The decline reflects a major restructuring of the company, including the bankruptcy of its Qubefootwear unit, sales of a chain of fitness clubs and associated stores, the elimination of 140 leases, the injection of £100 million in new capital and a management and board overhaul.  The company now operates 250 stores with 2.7 million square feet of retail space. This is a reduction of 0.9m square feet from the start of the year. Gross margins and comp store sales have been improving since February, the company said.


“The year under review was the most difficult in the history of JJB Sports, when the business faced a fight for survival, said CEO Keith Jones, who took the reins at the company in March. “The focus for 2010 is to turn around our trading performance, improve our operational execution in all aspects of the business, and lay the foundations for consistent growth in the future.”


That focus includes remaining a major national sports retailer who caters to beginners, enthusiasts and experienced participants, Jones said.

The retailer is working with key suppliers to increase and improve product ranges and availability, including a wider selection of exclusive and own label products and plans to refurbish test stores in summer 2010. It is also investing in an IT platform to link the inventory systems between its webstore and retail locations.

“JJB’s recovery will be neither quick nor easy,” said Chairman John Clare. “The company suffered considerably through all the events of last year and it will take time to encourage customers back into our stores and rebuild our creditability as Britain’s leading sports retailer. “

Below are excerpts from Clare’s statement on the year:


“This accounting period has been all about managing the business through a time of diminishing retail demand and with limited resources, whilst dealing with internal and external challenges across the Group. As noted above, the Company has been operating under intense scrutiny and pressure from its lenders and its suppliers, limiting the scope, particularly in the first half of the accounting period, for any advance in the Group’s retail operations.


The continuing poor retail conditions during the accounting period under review together with well reported trading issues for JJB resulted in reduced sales and operating loss for the period. Stock levels were seriously eroded from levels of previous years and that needed to trade the business effectively.

 

In addition gross margin was significantly reduced as old, non‐core lines were cleared to make way for newer lines more in line with the strategy of Serious about Sport. This was particularly true for the first half year to July 2009. During this period we worked closely with our suppliers, particularly NIKE and Adidas, to gain access to merchandise ranges which were more closely aligned to our strategy. Due to the long lead times necessary for these products, it was not until December 2009 that any real improvement was seen in our stock levels, and these were still lower than previous years.

 

Gross margin did improve in the second half year to 42.3% from the 34% level that it dropped to in the first half year. The post Christmas Sale was launched on Boxing Day and had to be run for a longer than planned period through to Jan. 22 2010, caused by the prolonged severe winter weather experienced across the country.

“The value of inventories at Jan. 31, 2010 was £68.6 million ($109.7mm), 2.8% lower than at Jan. 25, 2009. This is below the expected levels due to long product lead times on new stock orders and continuing financial concerns. The Group’s net cash, excluding loan notes, at Jan. 31 2010 was £58.8 million ($94.0mm) compared to £34.4 million ($55.2mm) net debt at Jan. 25 2009. The principal reason for the improvement was the raising of fresh equity and the disposal of the fitness clubs.”