The company would not discuss details of its forthcoming promotions, although it did concede some could be linked to the forthcoming launch of the new England soccer strip and to the half-term school holidays. JJB ran a three-for-two promotion on all its items over the August Bank Holiday weekend and throughout September it is offering a "spend and save" promotion giving £5 off for every £30 spent.
"Promotions seem to be the common theme against an increasingly tough backdrop as retailers are finding they have to be more promotional to drive their business." As soon as they come off promotion, they find the going very tough, but these promotions erode their profit margins. The problem is what has happened since then. Matthew McEachran, analyst at Singer Capital Markets, said: "The JJB results for the half year were basically in line with expectations. As well as next month's government spending review, which will determine the fallout of the biggest austerity budget since the second world war, there will be a rise in VAT from 17.5% to 20% in January. Peter Lewis, Game Group's chairman, blamed "a very challenging marketplace and an uncertain economy" for the decline in his company's fortunes and said he remained "mindful of the prevailing tough market conditions."Īnalysts pointed to the growth in the number of sales promotions as evidence that the retail market was likely to remain tough for the foreseeable future.
Game announced a swing into the red – from a pre-tax profit of £14.5m to an £18.8m loss – in the six months to July 31, as sales fell by 9.6% to £624.6m. Separately, Game Group disclosed that its gross margin, a measure of profitability, declined by 2.9 percentage points to 26% in its first half, as it embarked on a campaign of "high-profile one-off discount sales", according to finance director Ben White. The group said its loss narrowed to £24.6m from £41.9m a year earlier. JJB updated the market on recent trading after reporting a decline in first-half losses in the six months to the beginning of August, as the World Cup helped boost group sales by 10% to £184m. But growth fell to 6% in the four weeks to September 26. Like-for-like sales growth at JJB had jumped to 18% in August on the back of promotions that boosted revenues at the expense of profitability. We have consequently taken further steps to drive autumn and peak season sales through increased promotional activity." He said: "Since the half yearend, sales have been more volatile. The pair are believed to have had a meeting two weeks ago at the Wrightington Hotel & Country Club in Wigan.Keith Jones, JJB Sports chief executive, pledged to make the 249-store chain "synonymous" with sales promotions as he revealed sales growth had dived this month.
Meanwhile Whelan told The Observer newspaper that Ashley had encouraged him to let the chain he founded go bust. The Sunday Times said that Ashley had made a £80m bid for JJB Sports’ gym club business before Christmas but said that no deal was agreed and that Ashley was subsequently frozen out of the auction, with Whelan given exclusivity on a deal. Sources suggest Whelan will buy the business by Wednesday this week. The future of the entire JJB Sports chain rests on the Whelan deal completing this week – without it JJB Sports will not have the cash to pay its bank loans or its landlords cash due this week and it will collapse into administration. Reports over the weekend suggested Sports Direct founder Mike Ashley had written to JJB’s landlords asking them not to reassign leases to Dave Whelan, the original founder of JJB, who is close buying back JJB’s gym business for £70m.