Business World

Monday 19 August 2019

HoF tie-up forces Sports Direct to delay results

British retailer Sports Direct has delayed publishing its annual results, warning problems integrating its purchase of House of Fraser stores and increased scrutiny of its accounts could affect the financial guidance that it gave in December. (PA)
British retailer Sports Direct has delayed publishing its annual results, warning problems integrating its purchase of House of Fraser stores and increased scrutiny of its accounts could affect the financial guidance that it gave in December. (PA)

Kate Holton

British retailer Sports Direct has delayed publishing its annual results, warning problems integrating its purchase of House of Fraser stores and increased scrutiny of its accounts could affect the financial guidance that it gave in December.

Shares in the company, controlled by Newcastle United soccer club owner Mike Ashley, dropped as much as 16pc to a seven-year low of 220.2 pence yesterday.

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Sports Direct described trading in December as "unbelievably bad".

While it did not give an update on its core sporting goods stores, it referred to complexities in integrating the House of Fraser chain which it bought last year, and "uncertainty as to the future trading performance of this business".

"HoF is clearly a disaster area, so this is a serious situation," independent retail analyst Nick Bubb said.

Sports Direct's core chain has been a relatively resilient performer in recent years.

However, the group has also engaged in a raft of deal- making that has complicated the business.

It recently spent time trying - and failing - to buy department store group Debenhams, after purchasing House of Fraser out of administration last year.

Yesterday, the company said it also now controlled video gaming retailer Game Digital, "thereby adding to the complexity of the business", according to Mr Bubb. AJ Bell analysts questioned whether the acquisition spree was proving a distraction.

"Since Mr Ashley gave guidance both including and excluding House of Fraser some eight months ago, this implies that trading in the core retail business has also disappointed," they said.

Sports Direct said in December that its core business was on track to meet its target of growing earnings by 5-15pc in the year to April 29, 2019, but the House of Fraser acquisition would result in a drop in full-year earnings.

Sports Direct, which is 61pc owned by Mr Ashley, said the timing of its results had also been affected by a review by Britain's accounting watchdog of Grant Thornton's audit of the company's results for the year ended April 29, 2018.

It said this meant the company had to compile more information than in previous years.

The business had planned to publish its results on July 18, but said it now expected to do so between July 26 and August 23.

"Sports Direct would note that its core principles in regards to its financial statements are to be conservative, consistent and simple," the firm said.

Mr Ashley had said in December there were significant challenges for House of Fraser, but there was also a "fantastic opportunity" to revive the chain.

Reuters

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