Critical Analysis of the Financial Health of JJB Sports Company 2000 and 2012

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The stock performance of JJB in the year 2012 has continuously improved, in accordance with the regularity of deliveries to the stores. This has seen JJB make a tremendous impact on its profitability and levels of turnovers compared to 2000.

In the 2000 fiscal year ending January 31st, 2000, before the amortization of goodwill and exceptional items, JJB Sports had a turnover of 65 percent, operating profit of 69 percent, profit on ordinary activities before taxation of 64 percent, headline earnings per ordinary share of 42 percent and dividends per ordinary share of 19 percent (JJB Sports PLC, 2000).

Starting in 1996, the turnover on continuing operations rose steadily from £89.64 million in 1996, to £130.83 million in 1997, to £203.60 million in 1998, to £372.98 million in 1999, and the highest turnover ever of £614 million in 2000. This shows the commitment of the JJB Sport staff in their dedication to dominating the sport goods market (JJB Sports PLC, 2000).

Turning to the profit on ordinary activities before taxation, JJB Sports has also been able to maintain a steady growth since 1996: £12.90 million, £20.33 million, £34.20 million, £43.23 million and £71.03 million in the years 1996, 1997, 1998 and 2000 respectively. This figure shows how involved JJB Sports is in striving to grow sales in a highly competitive market (Tracy, n.d.).

The number of stores has also steadily increased, with 148 stores in 1998, 167 in 1997, 202 in 1998, 471 in 1999 and surprisingly, a reduction to 436 in 2000. The reduced number of stores was attributed to a new policy which saw the closure of small uneconomic stores on high streets and the opening of superstores capable of accommodating a larger range of products. Out of these stores, 204 of them were superstores, with an average of 13,000 square feet (JJB Sports PLC, 2000).

Comparing the above financial analysis with 2012, the operating results was noted as follows:

  • Revenue of £284 million as at end of January 2012 from £363 million as at end of January 2011,
  • Cost of sales £182 million as at end of January 2012 from £238 million as at end of January 2011,
  • Gross profit £101 million as at end of January 2012 from £124 million, as at end of January 2011,
  • Other operating income £2 million as at end of January 2012 from £1 million as at end of January 2011,
  • Distribution expenses £16 million as at end of January 2012 from £20 million as at end of January 2011,
  • Administration expenses £21 million as at end of January 2012 from £24 million as at end of January 2011,
  • Selling expenses £169 million as at end of January 2012 from £263 million as at end of January 2011,
  • Operating loss £103 million as at end of January 2012 from £181 million as at end of January 2011 (JJB Sports PLC, 2012).

The adjusted operating loss of £56 million as at end of January 2012 from £73 million as at end of January 2011 was attributed to the increase of HMRC reorganization costs, impairment of intangible and tangible assets and the increase in property provisions (Tracy, n.d.).

JJB heavily depends on its main suppliers in their devoted continuity to support the business in the design and production of a high-quality range of products to be distributed across its retail stores.

JJB should always ensure availability of credit, since this determines the Company's ability to pursue expansion and investment of availability and future cost of finance. The Company currently (2012) deals with creditworthy counterparties only, as a result of adopting a policy that ensures that only creditworthy counterparties are considered in doing business. This policy needs to be double-checked against other options that might bring about consideration of un-creditworthy counterparties, being considered depending on their business proposal compared to the risks involved, as was the case during the year 2000 and previous years (Accounting Reports, n.d.).

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