Competition hits sportswear group's profits

UK sportswear group JJB Sports today warned that annual profits would fail to meet market hopes after tough competition in clothing and footwear led to heavy discounting.

JJB has 441 stores in Ireland and the UK comprising 195 out of town superstores, 106 high street superstores, 113 smaller branches in town and city centres and 27 other outlets.

The sports clothing retailer said profit margins were hit by a “vigorous promotional campaign” launched in October and a Christmas/New Year sale which started on December 19.

Chairman Roger Lane-Smith said in a trading statement for the 22 weeks to January 1 that he was “disappointed” with the group’s performance.

Pre-tax profits for the year to January 29 were now expected to be within the range of £32m (€46.4m) to £36m (€52.2m), lower than current market hopes for around £40m (€58m) to £45m (€65m).

Mr Lane-Smith, who took over as chairman in July from JJB founder Dave Whelan, said: "Our performance has been hampered by strong retail competition in clothing and footwear and I expect these conditions to continue for some time."

However, the continued roll-out of combined health stores and superstores and potential benefits from events such as the World Cup this June should help the group achieve a better performance in the new financial year, he added.

JJB said sales promotions launched in October resulted in a more satisfactory level of revenues than achieved in its first half, but led to “materially” lower margins.

Increased revenues from the Christmas sale more than compensated for the reduction in margins suffered in the two-week period.

Same-store sales – stripping out the impact of store openings and closures - were 0.4% lower in the 22 weeks than during the same period last year. This recovered to a 2% increase for the final six weeks of the period.

JJB operates from 439 outlets, including 193 out-of-town superstores, 109 high street superstores and 137 smaller high street shops.

It has been moving away from small high street stores to concentrate on bigger sites and closed a number of its poorer performing superstores in the second half of the financial year just ended.

JJB plans to open a further 18 superstores – including some with health clubs - during 2006.