The restructuring of JJB Sports will not be easy, due in part to intense competition in the British sporting goods market, and the recovery will most likely take three to five years. That's what Mike McTigh, who became chairman of the company last Dec. 23, said in presenting its results for the financial year ended last Jan. 30.

He pointed out, however, that the headcount and operating costs have been significantly reduced following completion of JJB's financial restructuring at the end of April. One of the immediate consequences was the shutdown of a further 18 stores. Savings have been realized in warehousing, distribution, store wages and central overhead costs.

He and JJB's chief executive, Keith Jones, pointed in particular to the improved performance of six pilot stores based on a new concept. Their sales were 16 percent better than the group's average in the last three months of the financial year, and their gross profits were 30 percent higher. Another 150 stores are targeted for refitting in the current financial year, and 50 more in the next one.

The program for the next months will include the development of exclusive products, the sourcing of differentiating items from key suppliers and the broadening of JJB's online range by introducing, here again, online exclusives. A mobile version of JJB's web shop is under development.

The results for the past financial year, consisting of 53 weeks of trading, show an adjusted operating loss of £73.9 million (€82.8m-$121.3m) for JJB's continuing operations, compared with a loss of £67.7 million in the prior year. Including an impairment charge for the company's poor performance and other exceptional items, the operating loss increased to £181.8 million (€203.7m-$298.5m). The net loss jumped to £181.4 million (€203.3m_$297.8m) from £68.6 million.

Revenues from the ongoing retail operations, which measured 2,748,000 square feet at the end of the period; managed a tiny 0.5 percent increase to £362.9 million (€406.6m-$595.8m). Yet, the gross margin fell to 34.4 percent from 38.1 percent.

JJB Sports Consolidated Income Statement

(Million £, Year ended Jan. 30)

2011

2010

% Change

TOTAL REVENUES

362,894

372,493

-2.6

Cost of Sales

238,020

230,416

3.3

Other Operating Income

1,848

3,742

-50.6

Other Operating Expenses

308,534

213,131

44.8

Operating Loss

181,812

67,312

170.1

Pre-Tax

(181,365)

(68,592)

164.4

Tax

-

7,475

-

NET LOSS*

181,365

61,117

196.8

Pence/share - diluted*

61.8

20.8

196.7

*continuing operations

The management admitted that JJB's trading performance had been poor and consistently below expectations, due in part to “weaknesses in buying disciplines and processes.” In addition, cash constraints resulted in stock arriving too late to be sold.

This was particularly the case in the second half of the financial year, where sales declined by 1.5 percent on a comparable store basis, after an increase of 14.4 percent in the first half. Between the first half and the second half, the gross margin dipped from 42.2 percent to as low as 26.4 percent.