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Will Dunlop be first of many brand sales at Sports Direct?

Peel Hunt says Sports Direct shares are "becoming very interesting" as it focusses on core brands.

Sports Direct store
Mike Ashley's Sports Direct is focussing on core brands

Sports Direct Plc’s (LON:SPD) £112mln disposal of Dunlop will be the first in a number of brand sales.

This morning Mike Ashley’s retail group announced it had agreed to sell the Dunlop brand to Japan’s Sumitomo Rubber Industries for £112mln so it can concentrate on becoming the “Selfridges of sports retail”.

The business, which turned over almost £43mln last year, was acquired 12 years ago for £40mln.

Sumitomo, a conglomerate with interest spanning construction, media and food, already owns the rights to Dunlop in Japan, Korea and Taiwan and shares the US rights with Sports Direct.

The sale is part of founder Mike Ashley’s back to basics strategy of focusing on core brands.

Sports Direct cited a lack of management “bandwidth” to maintain and grow the label, although it will hold a royalty-free licence to continue to produce Dunlop workwear.

“We would thus expect this to be the first of a number of brand disposals. The volte face is enormous here,” Peel Hunt analyst Jonathan Pritchard said in a note.

“It will take time for sports direct to win over the third party brands but it seems that Mr Ashley's words are not just rhetoric. The shares are becoming very interesting if UK trading could be stabilised and a couple of solid names arrived on the board. Fascinating times.”

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