A turnaround investment deal with Dick's Sporting Goods Inc. has failed to lift JJB Sports plc out of the doldrums, according to a Monday trading statement that was accompanied by news of the sudden departure of the U.K. sports retailer's chairman.
The Wigan, England, company said sales since April 1 "have fallen materially short of expectations," with the European Football Championships failing to deliver the anticipated uplift in May and June.
In the 22 weeks ended July 1, same-store sales fell 8%, reported JJB, which said chairman Mike McTighe will be replaced by Robert Corliss in September. Corliss, now president and CEO of Robert Talbott Inc., will initially become deputy chairman during a handover period.
JJB shares were down more than 21% at 7.75 pence, less than half their level of early April, when Dick's signed up to a financing package that could leave the Pittsburgh group with a 61% stake.
Dick's invested £1.25 million ($1.94 million) for a 3.1% JJB stake in late April and bought £18.75 million of loan notes. In the first quarter of next year, Dick's has the right to invest a further £20 million in convertible loan notes. If it decides to proceed, which would appear less likely following the Monday trading bulletin, Dick's will end up with a 61% JJB stake on conversion of the second tranche of notes.
JJB has latched on to multiple lifelines in recent years, twice evading bankruptcy by restructuring under so-called company voluntary arrangements. The Dick's financing was designed to allow JJB to capitalize on the London Olympics this summer by helping to fund store overhauls to arrest a decline in its sales.
Under the early April deal, existing investors Invesco Asset Management Ltd., Harris Associates LP, Crystal Amber Fund Ltd. and the Bill and Melinda Gates Foundation also agreed to invest £10 million this year by exercising existing warrants and subscribing for new shares. They may invest in a £5 million equity offering planned for next year.
In addition, supplier Adidas AG agreed to lend JJB up to £15 million, and Lloyds Banking Group plc's Bank of Scotland plc said it would extend existing facilities until May 2015.
JJB had £15.4 million of debt as of July 1, and as of midafternoon Monday, a market value of £31.5 million.