JJB Sports Plc.

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JJB Sports Plc.

Martland Park
Challenge Way
Wigan
Lancashire WN5 OLD
United Kingdom
Telephone: +44 1942 221400
Fax: +441942629809
Web site: http://www.jjb.co.uk

Public Company
Incorporated: 1971
Employees: : 5,000
Sales: £372.97 million (US$636.60 million) (1999)
Stock Exchanges: London
Ticker Symbol: JJB
NAIC: 45111 Sporting Goods Stores

JJB Sports plc is in the big leagues of U.K. sports retailing. The leading sports equipment and sports apparel retailer operates 450 stores under the JJB Sports and Sports Division names throughout the United Kingdom. More than 180 of these stores feature a superstore format of more than 10,000 square feet. The company is phasing out its smaller stores in favor of converting most of its shops to the superstore concept. JJB Sports is also phasing out the Sports Division name, replacing the storefronts gained from its acquisition of its main U.K. rival with its own name. While absorbing the larger Sports Division has been difficult for the company, JJB Sports continues an aggressive expansion, opening 25 sites—including 21 superstores—during 1999. Unlike such competitors as Intersport and JD Sports, JJB Sports focuses on sporting goods, rather than the fading leisure and sportswear trends of the late 1990s. Nonetheless, clothing represented 43 percent (49 percent at Sports Division) of the company’s sales in 1999, with footwear adding 30 percent (33 percent at Sports Division). The company also generated 14 percent of sales with so-called replica football (soccer) and rugby kits, featuring the colors of U.K. clubs. All of JJB Sports’ sales are made in the United Kingdom. The company continues to be led by founder David Whelan, as well as his son-in-law (and heir apparent) Duncan Sharpe.

Coal Mines to Goal Lines in the 1960s

David Whelan came from a mining background. All of the male members of the Whelan family had worked the Wigan, Lancashire, mines. However, Whelan’s father was determined to spare his sons from the same life of hardship; he forbade them from following the family mining tradition, insisting instead that Whelan become an engineer’s apprentice. At the age of 15, however, Whelan left school in order to pursue a career in professional football (soccer). At the age of 17, Whelan had been signed to play for the Blackburn Rovers, earning £5 per week. By the age of 23, however, Whelan’s football career was over. Having helped his team reach the FA Cup final round, at Wembley Stadium, Whelan, playing fullback, broke his leg in three places.

Whelan made a go at returning to the field, after two years of recovery, only to break his leg a second time. With no education and no more than the £400 bonus paid to him by Blackburn for helping the team reach the finals, Whelan was forced to find a new career. Whelan used the bonus money to buy out a stall in Blackburn’s outdoor market, where he began selling toiletry items and groceries. Whelan’s talents as a salesman and entrepreneur quickly came to light. Soon after, Whelan opened a second stall, at Wigan’s market. By the end of the 1960s, Whelan had moved to an actual shop, on the edge of Wigan, before opening a second shop in the center of town. Whelan incorporated his stores under the name Whelan’s Discount Stores, expanding to a full supermarket concept and building up a chain of ten stores by the end of the 1970s. In 1978, Whelan agreed to sell his chain to the northern-based Wm. Morrison chain of supermarkets, which paid Whelan £1.5 million.

Rather than retire, at age 60, Whelan turned to a new retailing direction. In 1971, Whelan had purchased and incorporated a small bait-and-tackle and sports shop on the outskirts of Wigan. The store had been in existence since 1903, when it was opened by rugby player J.J. Broughton. After Broughton, the store came under the ownership of another former athlete, J.J. Bradburn, with fishing equipment and model railroads providing the bulk of sales. Whelan took the shared initials of the store’s former owners, naming the store JJB Sports. After the sale of Whelan’s Discount Stores, Whelan decided to spend his “retirement” building JJB into the United Kingdom’s largest sports retailer—and making himself one of the U.K.’s wealthiest businessmen.

JJB Sports’ first year of business under Whelan produced a modest £22,000 in sales, the largest portion of which represented sales of bait, namely maggots. When the store’s refrigerator broke down, Whelan decided to redirect his shop’s focus to a less perishable product. As such he began stocking his shelves with sports equipment and related items, eliminating model railroads, and reducing emphasis on fishing supplies. By 1979, JJB Sports had become solely dedicated to sports equipment and to strong growth. By the end of 1979, Whelan’s retail experience had enabled him to build a chain of seven stores.

JJB Sports arrived just in time to ride a boom in the sporting goods market. Beginning in the late 1970s and taking off into the early 1980s, the United Kingdom, like the United States, saw a huge increase in consumer interest in sporting activities, and in the products that accompanied the various sports. Inspired in part by a building awareness of the importance of personal health and fitness, consumers began looking to fill their leisure time with participation in sports. While consumers continued to play traditional sports, new sports categories and their supporting products had appeared, thanks to booms in jogging, aerobics, and general fitness. JJB Sports quickly became a regional center for the new wave of amateur athletes.

U.K. Leader in the 1990s

Whelan was joined by son-in-law Duncan Sharpe in 1983. Already a professional golfer for some seven years, Sharp, then 23, started out as an area manager with JJB Sports, before rising to become the company’s managing director—and chosen heir to Whelan’s leadership. Whelan and Sharpe continued to build JJB Sports and to refine their sporting goods concept through the 1980s. While stores tended to be small, city-center based shops, the company began introducing the superstore concept adapted from the United States. The company also launched a side chain of Alpine Sports shops, concentrated on items for the climbing, hiking, and ski markets. However, in 1988 JJB Sports acquired the 11-store chain of Howards Sports, from rival Blacks’ Leisure, in exchange for the Alpine Sports concept. Whelan continued to pursue other entrepreneurial side projects. In 1992, for example, he purchased a Wigan pie shop and renamed the shop’s pie specialty as “Wigan’s Pie,” which he then began marketing throughout northwestern England. In the same year, JJB Sports opened its 100th store.

JJB Sports continued its growth into the 1990s, eschewing further acquisitions to focus on organic growth. With the sporting goods boom in full-swing, driven by a growing trend that adopted sportswear—and sporting brand names—as fashion apparel, JJB engaged in an aggressive store opening schedule that brought the chain to 119 stores by 1994. In order to fuel further growth, the company went public in that year, taking a listing on the London stock exchange. Whelan and his family, however, retained majority control of the company he had founded.

Whelan attempted a brief international excursion, opening three JJB stores in Spain in the mid-1990s. The move proved unsuccessful, however, and the three Spanish stores were closed in 1997. Back home, however, JJB continued to ride the growth of the sporting goods market, adding a new warehouse and distribution center in 1996 in order to accommodate the chain’s growth. In that year, JJB opened more than 35 stores. By 1997, the company, with 170 stores, announced its intention to open some 50 stores per year for ten years—with a growing percentage of new store openings represented by the larger superstore format—as well as its intention to build the chain to a nationwide concern of 500 “high street” stores and 200 suburban stores. The company also began testing a new store format, aimed at the burgeoning children’s sports apparel market, dubbed Future Stars.

JJB Sports took a huge leap toward meeting its goal in 1998 when it surprised the sporting goods industry by acquiring larger rival Sports Division. Slumping retail sales in general, and fears that the sporting goods and sports apparel trends had peaked, as well as growing competition as the United Kingdom’s fragmented sporting goods market began to consolidate, had combined to force the private Sports Division to abandon its plans for going public that year. Founded in 1984 by Tom Hunter, who started the company selling sports shoes from his garage, Sports Division had acquired former Sears subsidiary Olympus Sports in the late 1980s to become the United Kingdom’s largest sporting goods retailer. Upon the collapse of Sports Division’s proposed public flotation, Hunter agreed to allow JJB Sports to acquire his company, for £290 million, in July 1998. While this price was considered high by many industry analysts, the acquisitions more than doubled the size of JJB Sports, enabling it to top the 500-store mark, and making it far and away the leading sporting goods retailer in the United Kingdom. Hunter, age 37, initially took a position as vicechairman of the company, which remained under the JJB Sports name. After Whelan’s insistence, however, that son-in-law Sharpe remained in line to take over the leadership of JJB Sports, Hunter left the company.

Company Perspectives:

Company strategy is to strengthen and expand the business by a controlled increase in the number of stores and, in particular, to develop a chain of larger out-of-town stores. The company’s ambition was to build a network of over 500 outlets; this has now been achieved.

Although skeptical about the purchase prices, analysts greeted the merger with approval. The complementary nature of the two retail chains—with JJB Sports concentrated in the north and Sports Division focused on the south—created a truly national entity, with enough purchasing clout to reinforce its bargaining strength with sporting goods and sportswear manufacturers. Merging the operations proved more difficult than expected, however. The company ran into embarrassing difficulties when attempting to transfer Sports Division’s stock to JJB Sports’ warehouse and distribution facilities. The result was a two-week break in deliveries to the company’s stores, forcing JJB Sports to pull its advertising. At the same time, Sports Division’s cashier system turned out to be not Y2K compliant; stores were forced to close for half-days in order to update their cash registers.

Nonetheless, the company seemed to have solved most of its merger difficulties by mid-1999. The company also announced its decision to phase out the Sports Division name and to place those stores under the JJB Sports signage. This transformation was expected to take several years to complete—however, by the end of 1999 the company reported that the rebranding process was ten months ahead of schedule, and that all of the high street Sports Divisions had already been renamed JJB Sports. Meanwhile, JJB continued to announce aggressive organic expansion, calling for the opening of 26 stores—now primarily in the superstore format—by the start of 2000. At the same time, JJB opened the first of what it hoped would be a new winning format. In June 1999, the company prepared to open the Soccer Dome, in Wigan, featuring 11 indoor soccer fields, as well as a JJB Sports superstore and other amenities.