Sports Direct International PLC (LON:SPD) has told investors that trading at its ‘new generation’ stores continues to exceed its own expectations as it looks to become the ‘Selfridges of sports’.
The sportswear retailer, owned by colourful billionaire Mike Ashley, has invested more than £300mln over the past 12 months in adding the larger, more premium shops to its portfolio.
It hopes that the move will re-energise its relationships with big-name third party brands such as Nike and Adidas as well as help it to attract customers.
‘Outlook remains optimistic’
The early signs are promising it seems, and the FTSE 250 group repeated its “optimistic” outlook for this year, during which it expects underlying earnings (EBITDA) to grow by between 5% and 15%.
“We remain fully focussed on our strategic goal of moving our core business towards the 'Selfridges' of sport in order to further strengthen our proposition and drive long-term profitability,” said Ashley.
“We will continue to build on the positive progress that we have made over the last 12 months, which we outlined during a very constructive meeting with stakeholders in July.”
Confirms ownership of Flannels
At the bottom of today’s update was a few lines on Flannels, with Sports Direct confirming it had snapped up the remaining shares in the luxury fashion retailer to give it 100% ownership.
Earlier this month, reports suggested that Ashley had upped his stake in Flannels from 51% to more than 75% via a Sports Direct subsidiary.
“In response to recent media speculation about Flannels, we wish to clarify that the company now owns 100% of Flannels,” said Sports Direct.
“The board anticipates this acquisition will significantly enhance earnings in our Premium Lifestyle division in the medium to long-term.”
Not everyone thinks the acquisition will be beneficial though; Hargreaves Lansdown analyst Nicholas Hyett reckons it will act as another distraction from the core business.
“Sports Direct has once again proven unable to resist the temptation to dabble in a few side projects, having confirmed it now holds 100% of luxury fashion retailer Flannels.
“The group’s repeated inability to focus on one thing at a time has been a source of frustration for some investors…with stakes in businesses ranging from computer games to football pitches and catalogue sales.”
Dogged by off-field troubles
Despite the progress the boss talks of, Sports Direct has been dogged by off-field issues over the past 12 months.
The chain has come under fire for the ‘Victorian warehouse’ working conditions and employment practices at its distribution centres, while institutional investors have regularly voiced their frustrations at the top brass.
On top of that, Ashley has had his own well-publicised issues, including being sued for £15mln. Although he won that case, some of the details that emerged from it didn’t paint the best picture of him.
The Newcastle United owner referred to himself as a ‘power drinker’ and a story of when he vomited into a pub’s fireplace following a particularly boozy night with colleagues also came out.
Union boss not convinced Sports Direct is atoning for past mistakes
The topic of workers’ treatment is one that won’t go away and there were reports today that Sports Direct has failed to meet a key pledge it made last year.
In the wake of the scandal, the company said it would offer guaranteed hours to shopworkers and transfer some its warehouse staff to permanent contracts.
READ: Sports Direct under investor fire amid labour lapses
Unite union said it had found evidence that Sports Direct, which has been widely criticised for its heavy use of insecure zero-hours contracts, continues to advertise roles with “no guaranteed hours of work”.
Union boss Steve Turner added that there was also no evidence the firm has been moving significant numbers of agency staff into direct employment.
“This revelation shows it is ‘business as usual’ at Sports Direct and casts doubt on just how sincere it is about cleaning up its act,” said Turner.
“One year on Sports Direct has been caught red-handed breaking its promise to offer workers the security of knowing what hours they will work and how much they will earn from week to next.
“It blows a hole in Sports Direct’s commitment to treat workers with dignity and respect.”
Shares recovered as the monring progressed and were up 2.3% to 393.3p in mid-morning trade.
--Updates for additional info, analyst comment and share price--