JD Sports Fashion has pulled out of the running to buy rival JJB Sports, leaving Mike Ashley’s Sports Direct International as favourite to take over the struggling sportswear retailer.
Peter Cowgill, JD Sports executive chairman, told the Financial Times that his company withdrew from the sale process because of the two retailers’ different store sizes.
“We could have made a piecemeal bid, but JJB’s store sizes wouldn’t have been suitable for the JD format,” he said.
“The only interest would have been to take on the whole of JJB. A partial bid was not worthwhile. It was either all or nothing.”
When asked whether Mr Ashley’s Sports Direct was the favourite to take over JJB, Mr Cowgill said: “One would assume so.”
Administrator KPMG has been appointed to sell JJB and has been in discussions with several parties, including private equity groups, to dispose of the lossmaking retailer.
Mr Ashley’s Sports Direct is thought to be tempted by the opportunity to cherry pick the best of JJB’s 180 stores and close the remainder.
Stafford Group, a privately owned Irish conglomerate, has emerged as another interested party.
The news of JD Sports’ withdrawal came as the retailer reported a more than 80 per cent drop in interim pre-tax profit, dragged down by a £10m charge related to its acquisition of Blacks Leisure.
JD Sports blamed Blacks’ “critical lack of stock and unsustainable cost base” for the £10m charge, which contributed to a fall in first-half pre-tax profit from £20m a year ago to £2.9m.
JD Sports bought the outdoors wear retailer for £20m in a pre-pack administration agreement in January, in a deal that saved most of its 300 stores and 3,500 jobs.
Since then, the sports fashion company has closed 81 loss-making Blacks stores and cut costs. The outdoor clothing retailer now trades from roughly 200 Blacks- and Millets-branded outlets.
In the six months to the end of July, revenues at JD Sports rose from £439.8m to £556m, aided by the acquisition of Blacks. On a like-for-like basis, JD Sports revenues rose 1.1 per cent. Diluted earnings per share fell from 28.51p to 2.74p, and there was no dividend.
“Like-for-like sales growth slowed to zero in June/July (having been 1.8 per cent through April and May). Conditions in the industry weren’t easy at that time but that’s still a touch disappointing,” said Jonathan Pritchard at Oriel Securities.
In August, JD Sports sold Canterbury, the rugby brand that provides kit for the England, Scotland and South Africa national teams, to its majority shareholder Pentland, in a deal worth £22.7m.
JD Sports shares fell 1.8 per cent 0.5 per cent to 718.5p.