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JJB Shares Slump As Investor Writes Off £20m

(c) Sky News 2012

Shares in JJB Sports slumped as much as 28% before ending the day down by 23.7% after a major shareholder wrote off its investment in Britain's troubled sporting retailer.

Just five months after investing £20m in JJB (LSE: JJB.L - news) , US Company Dick's Sporting Goods effectively pulled the plug on the funds, as it took an impairment charge.

It comes as the Wigan-based retailer struggles to fight back against falling sales and strong competition.

In a statement Edward Stack, chief executive of Dick's Sporting Goods, said the company had not benefited since making its investment in April.

"JJB's performance has materially deteriorated from its expectations, partly due to a worsening macro environment in Europe (Chicago Options: ^REURUSD - news) , adverse weather conditions in the first quarter and lacklustre sales associated with the recent Euro Championships."

But some experts have claimed the investment was risky in the first place.

Atif Latif, director of Guardian Stockbrokers, explained: "The initial investment was a high risk play from Dick's, especially given the recent slowdown in seasonal sales from JJB.

"Although the initial investment news was well received, alongside recent stakebulding from other parties, this write-down has resulted in some selling on disappointment."

He added: "Over the medium term there is value in the company and with a strategy change we could see improvements that could increase the share price from current levels.

"We await developments on any other names that may look to buy the debt on JJB that could look to turn around the fortunes of the company."

The news follows that of the resignation of JJB's chief executive Keith Jones, who stepped down last month as the company continued to experience poor trading.

It also comes days after Sky's Mark Kleinman exclusively revealed that private equity tycoon Jon Moulton is seeking to take control of the retailer.

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