JJB Sports Takes Second Place

It's grim on the High Street, particularly for specialist retailers like JJB Sports (LSE: JJB). In addition to the much reported slowdown in consumer spending, companies like this have to face increasing competition from supermarkets like Tesco (LSE: TSCO) and Sainsbury (LSE: SBRY). And then there's the internet -- anyone with access to a computer can find 'designer' sports kit, genuine or bootlegged, at attractive prices.

Having a long-term business relationship with the big brands doesn't bring much comfort either. The more desirable brands know that the shops depend on them more than they depend on the shops. Trying to increase margins in that sort of environment is a true test of a purchaser's negotiating skills.

Hardly a surprise then that one of JJB's competitors, Allsports, went into administration last year. It's worth considering, though, that another competitor, the privately-held Sports World, is reported to have increased sales by 45% last year, replacing JJB as the country's biggest sports retailer.

All of this is reflected in this morning's preliminary results from JJB Sports. Like-for-like sales fell 4.3%, operating margins continue to be cut in an attempt to keep turnover up, and EPS plummeted from 19.54p to 13.10p. Pre-tax profit of £33.7m was within the £32m to £36m range predicted in January's trading statement. Shares fell 2.5% to 177p in early trading.

It's not all bad news, however. JJB is increasing investment in its more profitable Leisure Division, combining health clubs with superstores. A small but interesting part of this Leisure Division is JJB's indoor soccer pitch business -- 'Soccer Domes'. Unfortunately we don't have separate figures for this part of the business, but I would expect them to get a boost from the World Cup in June.

In October, Champion Shares editor Maynard Paton tipped a company in a similar business -- Goals Soccer Centres (LSE: GOAL). This is a pure play on the indoor soccer pitch market, without the complication of retail sports shops. Since his recommendation, the shares have risen 54%.

You can read more about this, and about Maynard's other recommendations, by taking a 30-day free trial. For a limited time only, new annual subscribers can enjoy a 20% discount, together with a free copy of Richard Farleigh's excellent investment book, Taming the Lion.