Sports Direct on the ball with strong figures

By KRISTY DORSEY
Published on 09/12/2012 00:00

SPORTS Direct is expected to post another strong set of figures this week, including continued growth in its brands division, where operations at youth fashion label Firetrap are being overhauled with the loss of more than 150 jobs.

The group, controlled by billionaire Newcastle United owner Mike Ashley, is the UK’s biggest sporting goods retailer with sales of more than £1.8 billion last year.

Sports Direct recently paid nearly £24 million for the brand, stock, website and 20 stores of collapsed rival JJB in a turn of events that consolidated its lead in the sporting goods sector.

Thursday’s half-year results will also include a first full contribution from Firetrap, which was purchased in a pre-pack administration in March.

Sports Direct is reportedly closing Firetrap’s head office in London following a move to put the brand on sale at Sports Direct at a cost of up to 75 per cent less than recommended retail price.

The wholesale business, which stocked Firetrap in independent stores at higher prices, is expected to shut down next year.

Nearly all of the 170 jobs at Firetrap are thought to be under threat, with a retained skeleton staff of perhaps only a dozen people due to relocate to new premises.

Analysts said the developments at Firetrap were not a surprise. Ashley’s Sports Direct has a reputation for ruthless brand management – a strategy that has allowed it to thrive through the downturn.

“You may not like it, but it has served them well,” said one analyst who asked not to be named.

In its pre-close trading statement in October, Sports Direct reported total sales of £403m for the three months to 30 September – an 18 per cent rise on the same period a year earlier.

Sales in the brands division – which also owns brands including Donnay, Karrimor and Slazenger – rose 18.9 per cent to £39.7m, including Firetrap wholesale sales of £7.8m.

Ashley is in talks about a possible multi-million sponsorship deal with Rangers that would see the Glasgow football club’s Ibrox Stadium renamed “Sports Direct Arena”. Rival proposals have also been put forward to the club.

Numis analyst Andrew Wade said: “As well as the benefit from JJB’s continued struggles, which may have been reduced through the quarter due to clearance activity, management pointed to benefits from the Olympics and a strong back-to-school period.”

The City will be keen to hear updates on potential acquisitions following reports that Ashley is hunting down a stake in department store chain House of Fraser.

He is understood to have met unnamed shareholders to discuss buying out investors and creating a strategic partnership.

Sports Direct acquired an 80 per cent shareholding in retail chains USC and Cruise for £7m last year from Ayrshire tycoon Sir Tom Hunter and bought a 51 per cent stake in premium clothing brand Flannels in the summer.