JJB issues warning over likely breach of loan terms

The group, which employs 6,300 staff, said it was in "constructive discussions" with the Bank of Scotland about the breach – due at the end of January – and the future financing of the business. It is also seeking alternative sources of finance.

The warning came as JJB said sales were below expectations and the heavy snowfall and freezing temperatures sweeping the country could further hurt performance.

A bout of promotional activity at rival SportsDirect has also added to JJB's woes, one City analyst warned.

With just a few weeks of Christmas and New Year trading remaining, the company said the full-year outlook remains uncertain.

The Wigan-based retailer, which operates nearly 250 stores, recently revealed that a major promotional drive had failed to deliver results.

It launched the price offensive for the autumn and Christmas period as part of a bid to protect its "Serious about Sport" turnaround strategy from the impact of challenging trading conditions.

The group, which last year stayed afloat thanks to a restructuring deal with landlords, required BoS to waive a covenant test in order for the promotional push to go ahead.

Mark Photiades, an analyst with Singer Capital, said that JJB may be forced to turn to shareholders in a further fundraising.

JJB shares slumped 18 per cent in the wake of yesterday's unscheduled update to close at 4.70p.

Kate Calvert, retail analyst at Seymour Pierce Research, said the broker maintained its "sell" recommendation and added JJB's financial position would "not be helped by a more promotional SportsDirect".

JJB's recent updates contrast with like-for-like sales growth of more than 20 per cent in the run-up to the World Cup.