Retailer JJB Sports today confirmed it had begun talks on the sale of the TJ Hughes chain it acquired just 18 months ago for £42.1m.
The move by the Wigan-based group comes despite an improvement in the performance of the discount operation, which trades from 39 outlets.
Across the group, JJB added its prospects appeared brighter after a tough start to the financial year caused interim profits before exceptional items to fall to £36.2m from £39.3m a year earlier.
Chairman Dave Whelan said improvements to buying and merchandising had already lifted the second half of the year, with like-for-like sales in JJB stores down 1.1% against a fall of 3% in the 26 weeks to 27 July.
In TJ Hughes, improvements to the format and trading performance since its acquisition resulted in a 7.4% rise in same-store sales in the second half.
The better performance has led JJB to consider further store openings, although the chain is no longer considered a core part of the group.
In a statement, JJB said: “Following a review of the group’s non-core activities, the board has entered into discussions which may lead to the sale of TJ Hughes.
“JJB is actively progressing negotiations, although these are at a relatively early stage.”
The group’s core estate now comprises 447 JJB stores, with the focus being on larger out-of-town sites and high street superstores.
An increasing number also have health clubs.
JJB said demand for most of the group’s products had been strong, although children’s clothing ranges suffered from strong competition in the value retail sector.
Margins improved during the period as JJB did not have to resort to the high level of price reductions needed in the second half of 2002.
The company added that the benefits of senior appointments in its buying department were also starting to filter through to the shop floor through enhanced ranges and better stock availability.
JJB announced a 33% higher half-year dividend following talks with institutional investors. The company said the rise to 3p per share reflected its cash rich position and confidence over future prospects.
The group, which also announced plans today to spend £3.5m on refurbishing 46 smaller high street stores, was the subject of a takeover approach from Whelan earlier this year.
However, the former footballer called off his plans to take the retailer private after being told his offer price had failed to win support.
Whelan made his approach with shares at a four-year low, although the stock has since cheered by more than £1 to 278.5p, including an extra 9p today.
The acquisition of TJ Hughes in April 2002 caused surprise in the City with many investors concerned about JJB’s diversification into a new retail area.
At the bottom-line, pretax profits were £24.2m, down on £32.8m a year earlier.
References: EGi News 08/10/03
