JJB reverses gameplan with sale of discount stores chain
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Your support makes all the difference.JJB Sports yesterday bowed to shareholder pressure, hoisting a "for sale" sign on TJ Hughes, the discount retailer that it acquired just 18 months ago and hiking its dividend payout. City sources said the chain, which was in a parlous state when JJB bought it for £42.3m, was likely to be sold to its management team although another bidder is also in the frame. A deal is expected before Christmas.
Tom Knight, JJB's chief executive, denied that the process of trying to integrate TJ Hughes had proved too much of a distraction, although the group's shares have almost halved since the sports retailer announced its attempt to take on the competitive world of discount retailing.
"Our investors clearly said: 'We don't think you should have bought TJ Hughes and we think you should increase your dividend payments.' We have taken heed of what they said," Mr Knight said. JJB's shares rose 10p to 279.5p.
It would be second time lucky for the discount retailer's management team, led by George Foster, which mounted a failed buyout attempt early last year. Chris Gorman, the Scottish entrepreneur who owns the Gadget Shop, also came closing to buying TJ Hughes, although sources close to him said he was unlikely to re-ignite his interest.
JJB, itself the subject of a failed management buyout attempt in the summer, is expected to return the £50m-plus proceeds from the sale to shareholders, either via share buybacks or a special dividend. The cash-generative company increased its interim payout by 33 per cent and said it would adopt a "progressive" dividend policy going forward. The about-change came as the company reported a 26 per cent fall in interim pre-tax profits to £24.2m. It said margins had improved during the past 10 weeks, although like-for-like sales in its core JJB business were 1 per cent lower, having climbed 7.6 per cent at TJ Hughes. JJB, which is Britain's biggest seller of soccer shirts, also revealed that it had beaten a retreat from Europe, closing its last remaining stores in the Netherlands.
It sees "significant" growth for its combined superstore and health club concept. Mr Knight said the group would add eight more fitness clubs-cum-sports stores this year, promising to "blow away" rival health club operators with its £33 per month membership rates.
The had not provided for the £8.4m levied by the Office of Fair Trading for fixing the price of replica football kits because it was convinced that its appeal would succeed. "It's not a question of proving our innocence because we are innocent," Mr Knight said.
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