JJB reported full-year pre-tax losses of £101m on sales down 21.7%. Photograph: Dave Thompson/PA
JJB Sports, the loss-making sports and leisure wear retailer, has been thrown a £20m lifeline by US retailer Dick’s Sporting Goods.
Dick’s, which runs 561 stores in the US, said the deal will eventually lead to it becoming JJB’s controlling shareholder and act as a “stepping stone” for the company’s global expansion.
Dick’s, which sells guns and ammunition alongside more traditional sporting goods, has committed to an initial £20m investment with the option of doubling it to £40m, which would give Dick’s a 61% controlling stake in JJB.
The Wigan-based company’s four biggest shareholders – Invesco, Harris Associates, Crystal Amber and the Bill and Melinda Gates Foundation – have also agreed to pump in £10m this year and £5m next year.
JJB’s chief executive, Keith Jones, said: “We believe that the investment package and strategic alliance with Dick’s will provide a real opportunity to accelerate JJB’s turnaround.” The deal was announced as JJB, which has been fighting for survival for the last few years, reported full-year pre-tax losses of £101m on sales down 21.7% to £284m.
A restructuring deal with its landlords prevented JJB falling into administration a year ago and 41 store closures helped the company reduce its losses from £181m a year earlier. The company said its net debt had increased to £20.6m from £11.3m at the end of January.
Edward Stack, chairman and chief executive of Dick’s said the JJB deal was an “exciting strategic investment that provides us with a valuable introduction into the workings of the United Kingdom sporting goods market”. Perhaps more in hope than reality, Stack added that the partnership with JJB would give Dick’s an “insight into the specific needs of UK athletes”.
Dick’s, which is now a Fortune 500 company, began life in 1948 when 18-year-old Richard “Dick” Stack opened a modest fishing bait shop in Binghamton, New York, with a $300 of his grandmother’s savings. The company now has 480 Dick’s stores in 44 states and an additional 81 Golf Galaxy shops. Stack ran the company until his retirement in 1984, when his son Edward took over.
JJB’s arch rival Sports Direct said it would “welcome” Dick’s to the market by kicking off a fierce price war. “Dick’s is well known in America for selling guns. We just want to let them know that over here, they will fight by our rules. We have three weapons of our own, and the customer knows they are unbeatable: price, price and price,” said Sports Direct’s chief executive, Dave Forsey. “Incidentally, we are interested to see Dick’s saying that JJB is a strong company. Our team, just like Newcastle United FC at the Sports Direct Arena, is flying high and ready for tougher opposition. Bring it on.”
JJB is still smarting from the embarrassment of seeing its former boss, Chris Ronnie, charged with a series of fraud offences on Wednesday.
Shares in JJB, which have almost doubled in the last few days on speculation of a deal, closed up 0.75p at 17p, valuing the company at almost £50m.
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