Sports Direct embarks on European expansion

Mike Ashley’s sportswear empire is pushing further into mainland Europe after agreeing to acquire controlling stakes in two retail chains.

With dominance in the UK, Sports Direct is looking to Europe. Picture: Complimentary

Sports Direct – Britain’s biggest sportswear retailer – is paying €40.5 million (£35m) to grab a 51 per cent share of Austria’s EAG. It is also acquiring 60 per cent of Sportland International Group (SIG), the largest sporting goods retailer in the Baltic region, for an undisclosed sum.

The twin deals mark the latest stage of international expansion by Sports Direct, which already has retail interests in Belgium, Cyprus, France, Holland, Ireland, Luxembourg and Slovenia.

The group, which is controlled by Newcastle United owner Ashley, has been strengthening its grip on the market in the UK, with sales soaring in the wake of rival JJB’s collapse. Its website, Sportdirect.com, has also posted sales gains.

Dave Forsey, chief executive of Sports Direct International, said: “The strategic investments announced in Austria and the Baltic region represent a continuation of our previously stated European expansion plans.

“Expected benefits from these investments include increased scale for our international business, growing international awareness of our group brands and additional expertise in specialist product categories such as winter sports.”

Cantor research analyst Kate Calvert maintained her “hold” recommendation on Sports

Direct’s shares and described the latest deals as “relatively small” in the context of a business turning over some £2 billion.

She noted: “Over the last four years, Sports Direct has benefited from an efficient execution of its strategy to dominate the UK, helped by capacity coming out of the market and the development of its internet business.

“However, we have become concerned of late that the recent spate of acquisitions may take management focus away from developing a dominant on-line business.”

Retail expert Nick Bubb said the group had acquired controlling stakes in the leading sports retailers in Austria and the Baltics, adding: “Needless to say, we’d never heard of either of them, but they look perfectly well structured deals.”

The deal to buy EAG comprises €10.5m for current shareholders plus €30m to pay off debts.

The family-owned company, which has a history dating back 80 years, operates 30 Eybl stores and 28 Sports Expert outlets. Three of the 58 stores are in Germany and the bulk in Austria.

EAG made net losses of €20.6m in the year ending August 2012. The deal is expected to complete by the end of July.

SIG, founded in 1995, has about 80 stores and is the top sports good retailer in the Baltics, operating Nike, O’Neill, Sportland and Timberland chains in Estonia, Latvia and Lithuania. The deal is expected to be completed by the end of June.