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This JJB update that sales and margins continue to slide tells us a number of things… (FYI, JJB is like The Sports Authority of the UK).

1) Things ain’t gettin’ any better in European retail

2) Confirmation that The European Championship was a bust.  Here’s a good theory from Moshe Silver, Hedgeye’s ever-watchful head of compliance. In his words “Further to your mention of weak Championship sales: the semi-finalists in the Euro Cup were Germany, Portugal, Italy and Spain – with Spain winning the Cup.  50% unemployment in Spain ages 30 and under, and not much better in Italy or Portugal.  Only the Germans can afford much in the way of discretionary spending, and they obviously weren’t jamming the barricades to buy Spanish jerseys.  Maybe it’s simply the fact that the folks who would love to buy championship gear just can’t afford to?  Except for the odd American (like me) who was in Madrid for the championship celebration, who would buy Team Spain?”

3) Dick’s Sporting Goods threw JJB a $31.8mm lifeline in April, buying a call option to become the controlling shareholder in 1Q13. With JJB on the ropes, our sense is that DKS will both protect and accelerate its investment, and potentially buy the entire entity in 2H.

4) Other creditors, including Adidas, have also flexed to get JJB in order. Interestingly, Nike has not been mentioned in the general press as one of those parties.

5) A wrinkle here is that Sports Direct – which is one of the thorns in JJB’s side – might have to deal with a far superior competitor in Dick’s Sporting Goods. But DKS holds the exclusive for Umbro in the US – a brand that Sports Direct has a vested interest in buying now that Nike has announced its planned divestiture. The primary shareholder of Sports Direct – Mike Ashley – has been extremely non-valuation-sensitive (and dare we say ego centric) with purchases in the past. He’ll want to own Umbro to use as a competitive weapon against DKS. The Punchline? The winner here might be Nike’s valuation for Umbro.