JJB Sports’ shares dropped dramatically to an all-time low after a prominent US investor wrote off £20 million that was put into the business only 5 months ago.
Shares plummeted by nearly a quarter to 3.3p yesterday to leave JJB with a market value of £12.7 million.
The sporting goods and ammunition chain, Dick’s Sporting Goods, withdrew the investment which was made in April after they were disappointed with sales over the summer.
In a statement Dick’s reported a pre-tax impairment charge of $32.4 million (£26.3 million) to dilute the amount earned on each share in JJB by $0.22 (£0.17).
Edward Stack, Dick’s Sporting Goods’ chairman and CEO said: “JJB’s performance has materially deteriorated from its expectations, partly due to a worsening macro environment in Europe, adverse weather conditions in the first quarter and lackluster sales associated with the recent Euro Championships,”
“While we continue to believe in the underlying opportunity within the UK sporting goods market, in light of these developments and our own assessments, we have determined to fully impair the value of our investment.”
The company stated that they have no further obligations to JJB, but would “continue to monitor the situation”.
JJB’s shares fell by just under 24% following Dick’s withdrawal of investment. The US chain will retain its stake in the company despite the write-off, and withhold the right to invest a further £20 million next year.
Private equity tycoon Jon Moulton has reportedly approached JJB and its lender Lloyds Banking Group last week over potentially taking hold of the struggling company.
Retail Consultant, Graham Soult, commented: “It’s hard to see where JJB goes from here. Dick’s Sporting Goods’ investment was important not just in keeping JJB afloat, but also in giving the business a sense of direction.
“In the US, Dick’s has real credibility as a sports equipment retailer, and JJB has been trying to adopt a similar market positioning, aiming to build a point of difference between it and its more fashion-focused rivals.
“I suspect that’s still the right way forward, but this latest development does raise more questions, sadly, over whether JJB will be around for long enough to implement those changes.”