JJB

Qualifying for the World Cup would greatly improve prospects for JJB Sports and Sports Direct

by John Marshall

England’s victory over Croatia could be a useful bonus for investors in JJB Sports (JJB) and Sports Direct (SPD). It makes qualification for the 2010 World Cup more likely, which will boost business and share price forecasts for both companies in the run-up to the event.

JJB Sports and Sports Direct both suffered when England failed to qualify for Euro 2008. In the Summer of 2006, when England were in the World Cup, JJB enjoyed underlying sales growth of 9.5%. Profits in that financial year rose by over 40%. Similarly Euro 2004 provided a boost to sales. This summer, both companies suffered poor underlying sales.

Both stocks have some speculative appeal as the intentions of their major shareholders are uncertain. The mercurial Mike Ashley now owns 72.2% of Sports Direct as successive share buybacks have diluted the interest of outside shareholders. He could easily be tempted to privatise the company.

Chris Ronnie bought his 28.9 % stake in JJB at 275p only 14 months ago, well below the current 111p. Optimists hope he might decide to take the company private – especially as he could buy the remaining shares much more cheaply.

Shares says: The growing confidence of England under Capello can only be a boost for both stocks. Buy