Business

JJB Sports shares plunge 20% after bank loan warning

 

Shares in JJB Sports have plunged 18% after the troubled retailer warned it was likely to breach conditions of loan agreements with its bank after worse-than-expected sales in recent weeks.

It said trading remained "extremely challenging" and was likely to deteriorate because of the bad weather.

The group said it was in "constructive discussions" with Bank of Scotland over the future financing of the business.

JJB has struggled with weak sales during the downturn.

It was forced to raise £100m in a rights issue in October last year.

Weak sales

"In light of continued difficult trading conditions, the company believes that it is likely that it will breach certain financial covenants in the £25m revolving facility provided by Bank of Scotland when they are next tested at the end of January 2011," JJB said.

A spokesperson for the group told the BBC that JJB was likely to fall below the level of financial cover stipulated by the bank when the loans were made.

The announcement did not mean that the retailer was likely to miss any loan repayments, he said.

Last month, JJB announced sales growth that was "lower than anticipated" and said full-year results were heavily dependent on Christmas and New Year trading.

On Thursday, the group said "trading conditions have remained extremely challenging and like-for-like sales have remained below expectations".

"The company believes that this will be further exacerbated by current adverse weather conditions."

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