Sports Direct's Ashley sounds alarm on UK retail
Reuters
Published Dec 13, 2018 12:33
Sports Direct's Ashley sounds alarm on UK retail
By Paul Sandle
LONDON (Reuters) - Sports Direct (LON:SPD) owner Mike Ashley described last month as "the worst November for retailers in living memory", adding to the sense of gloom hanging over British high streets during the peak Christmas season.
The comments from Ashley, who owns 61 percent of Sports Direct equity, chime with other gloomy news from retailers.
Shares in women's fashion group Bonmarche (L:BONB) fell as much as 50 percent on Thursday after it said it could report losses this year and was faring much worse than during the financial crisis. Clothing chain Primark had already warned of weak sales.
Ashley made his comments in a letter to the head of department store chain Debenhams (L:DEB), a company in which Sports Direct has a stake of just under 30 percent. The letter was first reported by the Daily Telegraph newspaper.
Shares in Sports Direct were almost 10 percent lower by 1200 GMT while Debenham's was down by 4 percent.
Ashley's comments and the impact of rescuing British department store group House of Fraser overshadowed a resilient performance from his sportswear and fashion chains that are benefiting from efforts to move up-market.
Underlying core earnings for Sports Direct slipped 4.7 percent to 148.8 million pounds for the six months to Oct. 28, a period including the purchase of House of Fraser in August.
House of Fraser made a loss of 31.5 million pounds between Aug. 10 and the end of the period.
Underlying earnings excluding the department stores rose 15.5 percent to 180.3 million pounds, boosted by its Flannels, Cruise and van mildert fashion chain and increased earnings from its European sportswear shops.
Ashley, who also owns Premier League soccer club Newcastle United, said there were significant challenges ahead for House of Fraser, but there was a "fantastic opportunity" to revive the chain.
Excluding the acquisition, he said the group's performance was impressive in the context of the current struggles in the sector.
Sport Direct is smartening up its stores and selling more premium products from its four key suppliers - Nike (N:NKE), Adidas (DE:ADSGn), Puma (DE:PUMG) and Under Armour (N:UAA) - to better compete with rivals JD Sports (L:JD) and Decathlon.
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The core business was on track to meet its target of growing earnings by 5-15 percent in the full year, it said, but House of Fraser acquisition would result in a drop in full-year earnings.
Deputy chief financial officer Chris Wootton said suppliers supported its improvement strategy, for example by supplying top-end soccer boots priced at 250 pounds.
Prior to Thursday's results, analysts' on average had expected 2018-19 core earnings to be 321.6 million pounds, according to Refinitiv data, versus 306.1 million pounds made in 2017-18.
Written By: Reuters
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