The poor economic conditions in the UK currently are taking their toll on the high street, with multiple chains and independent stores posting poor sales, profit warnings and even administration announcements on an almost weekly basis. Most recently, sporting goods retailer JJB Sports announced the failure of the chain to remain profitable, leaving bosses with no choice but to put the commercial properties owned by the brand up for sale.
Unfortunately, administrators KPMG announced earlier this week that only 20 of the stores in the portfolio would remain operational, following buyout negotiations with JJB Sports’ main rival Sports Direct. This meant that over 130 branches were forced to close on Monday of this week, leaving around 2, 200 of the chain’s employees without a job.
Sports Direct managing director and owner of Newcastle United football club Mike Ashley was tipped as the most likely investor to take over a portion of the business as soon as cracks began emerging in JJB Sports, with this scenario becoming a reality this week. As a result, 550 JJB Sports employees will remain in work in the sporting goods stores, which will now be refranchised as Sports Direct branches.
The 20 stores were sold to Sports Direct for a sum of £24 million. Also included in the sale was any remaining stock, the company website and the JJB Sports brand. However, this money will be put towards paying off the substantial debts incurred by JJB Sports in the past few years, meaning that shareholders will see no return on their investments. Microsoft owner Bill Gates, founder of the Bill and Melinda Gates charitable foundation, was one such investor affected by the fall from fortune of the sporting retailer.
Now administrators face the challenge of offloading the remaining stores. KPMG are currently considering measures such as selling leasehold interests to high street retailers. Despite the fact that the administrators spoke with over 100 interested parties in their first few days of appointment, no deal could be made to dig JJB Sports out of their financial black hole.
KPMG administrator David McCorquodale said; “Unfortunately, the level of cash and further operational restructuring required to rescue a more substantial part of the business was too much risk for most interested parties.”
As it stands, Sports Direct may have to pay up to a further £250,000 following a stock take to determine the value of goods being received by the sporting giants.
No decision has been made as yet about whether JJB Sports would continue to trade via the internet. The brand would be a viable online competitor to the dominant Sports Direct brand, yet until the company’s debts can be resolved trading will be suspended. However, should administrators be able to sell the leases of the remaining stores to high street retailers, there is a chance that consumers have not yet seen the end of what was once Britain’s most popular and profitable sporting retailer.
Do you think JJB Sports should have been given more help when financial cracks first began to appear, or do you believe the failure of the brand was simply down to poor management and economic planning? Now that Sports Direct have increased their commercial property portfolio by a further twenty stores, do you think that the sporting goods retailers have secured their place at the top of the market for the foreseeable future, or do you think competitors may still have a chance against Mike Ashley’s hugely successful business?
