Thursday, 30 July 2009

JJB and Blacks

Two of C&W picks for struggling retailers 2009 award are still struggling; Blacks Leisure and JJB.

has warned that its financial performance will be below market expectations after renegotiating its working capital facility with Lloyds Banking Group for a further 12 months. This leaves them without the resources to re brand the weak Boardwear {surfing} concept stores into the more successful Outdoor {camping}outlets.

JJB have been in the news for a bizarre story that says, a
ccording to The Telegraph, Mr Ashley is to issue legal proceedings against JJB after one of its security guards hired for its AGM allegedly ‘tailed’ one of Mr Ashley’s representatives in a dangerous manner on the M61 motorway. More worrying for JJB are these results:

Low stock results means empty shops. A large restocking exercise will further erode profits. 26.5% down isn't too catastrophic if, as it seems, they have been selling last years stocks.
But it must improve in the fourth quarter.
Overall retailers have performed above expectations. Since the Woolies collapse only a few high street names have disappeared.Chain stores cut stock levels very quickly and responded aggressively to the downturn.
In 1991 I remember a major shopping precinct where 25 out of 40 shops were empty. I have not seen anything like that devastation today. Partly because the chains are so much bigger. The bland 'everytown' high street is its own saviour, spreading the risk. Retailers have been able to secure their funding and renegotiate their debts, failure of which seemed the most likely scenario for their collapse back in January. Sadly, the lousy summer will almost certainly show a retail drop, on the back of the early summer's retail rise. But its all 1-2% stuff anyway and not worth worrying about.
If quarter 3 can be level then quarter 4 should show increases in sales.
Remember, the recession really started hitting right about now last year in the US.
Retailers MUST show increases in like-for-likes for Q4. They are facing their softest figures for years.

"The American consumer is 70 percent of this economy, and if the consumer hits a brick wall and stops, then the economy all across the nation will be in serious trouble."
July 2008


dearieme said...

I was in a shoe shop recently and was stunned by the empty shelves; where was the stock? There were piles of boxes, but they may have been empty.

Steven_L said...

I even saw a half-empty Oddbins a few months ago, their shelves seem to be a bit more like back to 'normal' now my new years resolutions have worn off though.

Elsewhere on the high street I notice TM Lewin's never-ending sale has got cheaper again, their receipts still try to tell you their ties cost £57 a pop (£15 at last count down from £25 before the crunch). If I was an unsympathetic kind of chap I could probably nick them for that.

The local whole-foods superstore (that sold decent cheese) has been gobbled up by Waitrose and a big reasonably expensive restaurant has become a £6.50 Chinese all you can eat.

Asda have dropped their 4 for £5 real ales offer and cheap supermarket Chilian wine is now cheaper than the Bulgarian/Hungarian stuff.

On the bright side though KFC is still serving variety meals and Nando's is still open.

Anonymous said...

How are retailers going to improve, when anal-ysts are predicting big plastic defaults/unemployment increases?

Houdini said...

I called JJB before you...:-) But the problem isn't just with JJB and Blacks, who are in the news because they have been previously, it is every retailer.

Go to Cheshire Oaks who were bursting at the seams with shops, full of people, and few sales, and they are closing down left right and centre, and the shops are all on at least a 70% sale, but more importantly, there are fewer shoppers, by a long way.

One of the causes, as related to me by an executive of a large chain and online concern I was doing a bit of business with, is that people don't need to spend and buy, and the shops are finally feeling this after ten years of spend spend spend. What he meant was is that there are just so many Wiis and Playstations to sell to a finite number of customers. Only so many flat screen TV's, DVD's etc. etc. etc. People he said don't need as such so aren't buying. There is no aspirational purchases to make because they have them.

This is one of the biggest problems.

Ed said...

Is London doing better than other parts of the country? The shops still seem busy and I haven't seen any ridiculous sales bargains recently. Not that I go shopping much...

Bill Quango MP said...

Dearieme: Shoes, as a sector, have been hard hit. Amongst those high street chains that went into administration were Barratts, Priceless and Dolcis. The year before it was Stead and Simpson and the designer BASE.
Mr Shoes, a chain with 23 stores went into administration a few weeks back.
Too many shoe stores in the marketplace.They were trading on impulse purchasing too.

Expect the high street Christmas stock to begin appearing very early this year. It will be back filling the empty spaces on the shelves the moment the sun goes in.

{if it ever comes out}

Steven L
Glad you recovered from clearing out the off licences.!

"The owner of troubled wine retailers Threshers and Wine Rack insists it is committed to their future, despite auditors expressing 'material uncertainty' about their ability to continue trading." a few weeks back.

They had the same headline in 2008.
Perhaps you could nip round and boost their sales?

TM Lewin. I must have a look. They are off the £100 for 4 are they?

Anon: The figures are very soft for the peak trade. Xmas shoppers cut back last year. Those that do not have to, will likely spend this year. The shops will be trying to gain the maximum advantage from the imminent end of the VAT cut. Lots of advertising about buy now,with the hint of the days of austerity to come in 2010.

And, lets face it, if there isn't an improvement for chains like JJB or Threshers/wine rack then it will all be over. Its the last chance to make good.

Bill Quango MP said...

BE: London gets a boost from tourists. Oxford street looks as busy as ever to me but I have no figures.
The low pound means a strong Euro.
To a French tourist an FCUK T/sh, which is priced 10-20% higher in France anyway, looks mightily attractive at 35% off.
Whether this tourist trend spreads down to south of the river I don't know.

Bill Quango MP said...


Haven't been to Cheshire Oaks but was at Gloucester quays, Bentalls and Bristol recently. A healthy footfall, lower than it could have been but not a wipe out.

The point about people not needing to spend is well made. The shoe shops suffered exactly for that reason.

However, this argument of finite customers often comes around. Sunday trading was said to be pointless as it was just spreading the customers over a longer period with higher costs. this was true for about five to ten years , but not anymore.
The right product at the right price will always sell.
The argument is do you really need 4 or 5 same type stores in a town.
The answer is no, if demand has fallen.

Another of our predicted for a very tough year / maybe game over chains was HMV. But with the loss of Woolworths and Zavvi and their own move into the console games market properly, rather than dicking about with it like they had done for years, has made them look quite good. Games and technology UP 24%. {total group 4.4%. Would be much better without Waterstones, but they are working on that.}

Rather than geographical expansion, it may well be better use of existing floor space and some innovative,desirable products rather than novelty ones, that will make the difference next year.

Ed said...

BQ interesting point. In many cities there will be far more branches of the same chain than can possibly make sense. In Manchester's Market Street there were something like three JJBs and of course three JDs and a couple of Sports Worlds. Now I know Northerners like their tracksuits but...

cosmic said...

People are far less inclined to extravagance. If the door seal on the fridge goes, buy a new seal rather than a new fridge. Fed up with the old telly? Live with it til it dies.

The housing market must have driven a lot of consumer spending, carpets, kitchens, curtains, furniture, garden stuff. B&Q seem to be desperate to sell with all sorts of special offers.

Another factor which must be causing at least some high street shops grief, is internet shopping. For anything specialised where you know what you want, it's certainly worth looking on-line. Probably cheaper, better choice, other buyers' comments.

Isn't JJB a fashion sportswear shop? £50 trainers and so on. Fashion implies whims and impulse buys. I can't see telling the customer that they don't have a pair in stock, but they can order them and they'll be there in three days, working out.

Doesn't there have to be a shake out in retailing in a recession as people are forced to look for value for money and essentials and don't regard shopping as retail therapy any more?

Steven_L said...

"The housing market must have driven a lot of consumer spending" (cosmic)

My mate who sells fitted kitchens has found that out. At the peak of the boom he was living in a quarter of a million pound "luxury penthouse" (a 2 bed shoebox), driving a smart 3 series, taking flash holidays and buying white shirts for £150 a piece.

He's renting again now, ignoring the credit card bill, hiding the beamer from the leasing company and living on yoghurt and toast.

The idiot hadn't done his tax return for 3 years and has been landed with a five figure bill coming he can't pay.

Bill Quango MP said...


Fashion and sportswear was a diversification from a few years back. A lot of menswear bought in branded sports lines, and vice versa.

The point about the housing market driver for home furnishings and DIY is true. Allied Carpets into administration just two weeks ago.
Something like 80% down on like for likes.
There is a bit of make do and mend going on. But it cannot return to the old days.
Who would repair a toaster? or a chair?
Its all about price. I have bought at least 4 kettles in 3 years.
One of them was a £15 cheapie while waiting for DeLonghi to get some stock in. I wouldn't do that now.

Steven L:
Tax return?....that reminds me...

Steven_L said...

I once came across a woman who had bought a £13 extended warranty on a £9 kettle.

Even better was a lady who had bought a fridge-freezer, been persuaded to take out credit on it and a store card with which to make the monthly repayments with.

cosmic said...


No one's going to fix a £5 toaster. Even if you were an electrical engineer and had the time, it probably wouldn't be repairable.

It's more likely that people would buy a £5 toaster than a £80 luxury toaster, or expresso machine, or deep fat turkey frier.

This is bound to hit the fashion and whimsy part of the market. People will put up with the £150 digital camera they've had for a year rather than give it away and buy a new one because it's 10 megapixels rather than 8. Throwing away the kettle because it's old and the new ones have a little panel so you can see the water boiling.

It's bound to be the same with shoes and fashion items. There's excess capacity there because it was stuff people didn't really need or it was replacing things that weren't worn out, just outmoded.

Now how stores like JJB go about getting out of the hole is interesting.

Batten down the hatches and hope the storm blows over in a year or so.

Hope that they can weather it better than others so they've the last man standing.

Restructure the company, getting rid of marginal sites and maybe having a good close look at what their business is.

Ed said...

Steven L: do you live in Stupidtown?

Steven_L said...

These people are everywhere Blue Eyes, in every town and city right up and down the UK.

A deadly combination of easy-ride consumerism and nanny-state regulation has effectively de-skilled many millions of consumers to the point of no return.

Bill Quango MP said...


Very good points about what do JJB, or any other retailer do.

HMV, as we saw, had nearly a quarter of sales generated by video games, which was really a newmarket for them.

JJB have done both fashion and footwear before, but have been burned.
But other sports retailers have done fashion and done it well.
Sports Direct like to take a valuable fashion label and reduce it in price until it becomes worthless. Along the way they make "shed loads" as Mr Ashley used to say.
This works , providing they have the ability to replace the brand they have just saturated the market with, with something more prestigious.

JJB have already cut out many double stores, many expensive units. The Original Shoe Company stores Qube shoes stores, part of JJB lifestyle have all gone. It sold off its fitness centres too. They have cut costs to the bone, lowered stock levels to the point where, it appears from their statement, they cannot generate sufficient turnover any longer and must restock.

The Olympics are too far away to help so it has to be South Africa 2010.

A really good England performance could see 5 million shirts sold in a two week period.The future of JJB probably rests as much on Fabio Capello as it does on Barclays and LLoyds not pulling the plug.

cosmic said...

JJB de-stocked to the point where they can't generate turnover. Hoping for a good result in SA in 2010 to rescue them. The problem with depending on something like that is being saddled with a lot of stock that's as much interest as yesterday's papers,if it all goes wrong. Is it really possible to get the stock in the few days that might be available during an England run? Anyway, it's a few months off.

Would JJB be 'only for the brave' as they used to say in Investor's Chronicle?

In previous times Next and French Connection turned out to be brilliant recovery plays going from pennies to pounds.

What makes JJB something to class with Next rather than all the others which went from pounds to pennies and didn't then go from pennies to pounds?

Houdini said...

However, this argument of finite customers often comes around. Sunday trading was said to be pointless as it was just spreading the customers over a longer period with higher costs. this was true for about five to ten years , but not anymore.
The right product at the right price will always sell.

No it won't Bill, not anymore. The point wasn't just about finite customers, but that the customers had to want to spend too. Remember that in the boom times when credit was easy and houses were fuelling the never-ending boom you were spot on, but now we see sense coming into the market and a hard rationalisation in the retail sector.

I have items for sale, not saying what, that should be 5k and are at 3k, some at 7k which should be 12k, but luckily I don't own them and am selling on behalf of others. Can I sell them? Not yet but hoping to as the game season gets under way. Same for all parts of this market, though my core business relatively speaking is booming.

Sunday trading ceased to be an issue when people started working shifts and the customers were shared, IMO of course.

I must admit that when I go out and see the shops bustling I think it is booming still, but look at how many shopping bags are being carried, and there are very few. Tyre kickers aplenty are there, but not spenders.

Next, Gap and PC World, while not likely to go bust, are going to dwindle.

Internet shopping is still big but is now starting to slow.

Electro-Kevin said...

The problem with JJB and Blacks ?

Bad footwear, baseball caps, fucked up hair and rap music.

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