Heat on Sports Direct and JJB as leisure worry grows

Mike Ashley and Chris Ronnie, the close friends who control rival leisurewear retailers Sports Direct and JJB Sports, each suffered minor blows today as City fears grew about the future of the sector.

Ashley's Sport Direct empire was slapped on the wrist by the Office of Fair Trading, which was investigating complaints that the retailer often holds "closing down" sales for stores that then stay open.

The OFT said the stores either did not close, or shut for a short time to allow for refurbishment. The watchdog said Sports Direct had agreed not to mislead customers in future, though analysts say the bigger concern for the health of the business is why it has to discount its stock so often.

JJB said its like-for-like sales dived 8.3% in the 13 weeks to the end of April, reflecting a "very challenging" retail environment. JJB said it is increasing margins after managing to clear old stock in recent months.

Dresdner Kleinwort downgraded the shares to hold from buy in light of the statement, noting that JJB has high levels of borrowing.

JJB shares lost 3¼p to 124p. Ashley, who made £949 million from floating Sports Direct a year ago, remains an enigmatic figure. He was recently revealed to have lost tens of millions of pounds betting that shares in HBOS would rise. Critics say he bought Newcastle United for a too-pricey £133 million and rumours continue to swirl that he is open to offers for the football club.

Sports Direct fell 1¾p to 110¾p. Ronnie, who along with financial group Exista controls 29% of JJB shares, was rumoured to be bidding for Blackburn Rovers.

Analysts say both companies will suffer from England's failure to quality for Euro 2008, with summer sales likely to be much lower than they would have been.