Sports Direct faces 'the worst conditions for 25 years'

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The Independent Online

The discount sports retailer Sports Direct warned of torrid trading on the high street as it posted tumbling underlying full-year pre-tax profits.

Sports Direct's executive deputy chairman, Mike Ashley, said: "Retailing on the high street is the worst for the 25 years we have been doing it."

The retailer blamed the England football team's non-appearance at Euro 2008, a wet summer in 2007 and low consumer confidence for the company's trading situation.

The discount sports goods chain – which has 375 stores in the UK, 60 overseas and owns brands such as Donnay and Lonsdale – lost lucrative sales of replica England football tops, when the national team failed to qualify for this summer's European championship.

For the year to 27 April, Sports Direct delivered underlying pre-tax profits down 51.1 per cent to £85m. The retailer's group sales fell by 6.5 per cent to £1.26bn.

Mr Ashley, the colourful founder of Sports Direct, who is also the owner of Newcastle United football club, said he would focus on turning around its UK retail business and not acquisitions over the next year.

Giving a typically indomitable performance, Mr Ashley said: "We think we have got to get in our bunker. We have got to get back to basics. Whenever you do a deal, it always takes more time than you think it will."

He added: "We are pretty determined that it [Sports Direct] achieves what it achieved last year – that is the goal. That is where the focus is, so if we miss one or two opportunities that are out there because we are focused on that, then so be it."

However, Sports Direct's chief executive, Dave Forsey, chipped in by saying that the retailer had acquired brands, such as Everlast, and had plenty of other opportunities to grow its partnerships in countries such as China.

In fact, Sports Direct acquired Golddigga, a sports fashion brand targeted at teenage girls, this week. Mr Ashley cracked a joke about the name Golddigga, saying that his ex-wife is sponsoring the brand.

Sports Direct said it expected conditions to get worse in the short term as consumers cut back on spending amid rising fuel, food and mortgage costs.

Despite this, Sports Direct said its underlying Ebitda in May and June this year was "marginally ahead" of the same period last year, boosted by robust sales of new products from Nike.

The Oriel Securities analyst Jonathan Pritchard commented: "The market in which it is trading is so tough at the moment that we believe only the very best brands will manage to hold Ebitda, and Sports Direct is not one of them."

Mr Ashley, who owns a 72.2 per cent stake in Sports Direct, said that being a listed company had helped Sports Direct when dealing with high-profile brands, including Nike.

"Being a plc puts us in a different category and [with] Nike things are very positive. We now get access to more product than we did as a private company." For example, he said that if Sports Direct sells robust volumes of trainers at £75, this convinces Nike to provide it with stock of £100 trainers.

Asked about speculation that he may be interested in a bid for JJB, Mr Ashley said: "JJB is nothing to do with Sports Direct or me. I am not involved in it, I do not own shares in it."

He also lambasted the new format stores that the outdoor specialist retailer Blacks Leisure, in which Sports Direct has a strategic investment, is piloting in two London locations.

"I don't understand why they would open one store in Kensington and one in Holborn. Now I am from Slough, and Holborn and Kensington are not very representative of the rest of the country.

"They might as well have put it in Lillywhites because that would have been successful, but not relevant to Slough. We are not therefore always seeing eye to eye with Blacks' management. That has been the history since we had the stake and continues to be the case," said Mr Ashley.

He said he had no plans to take Sports Direct private, saying he was "absolutely 100 per cent" about being publicly listed. When Sports Direct floated in February 2007 its share price was 300p, but yesterday it fell 11.5 per cent, or 8.25p, to 63.5p.

Mike Ashley in his own words

* On customer spending patterns, he said: "They want the latest product. They either want the latest product or extreme value. The middle ground is getting absolutely murdered. Customers are a lot more choosy."

* "People are definitely a lot more selective. You absolutely have to be spot on with product. Everything has to be correct – it has to be the product and price and everything that goes with it. If you get any of that wrong, the next price point down is horrific."

* "The regret of being a plc was getting ourselves stuck on predictions one year ago like a rabbit in the headlights and then we froze."

* "We got ourselves a little bit constrained as a public company by keeping to forecasts all the time and that is on everything."

* "I think there are very few people in the world who would [enjoy speaking to the press]. Who looks forward to that?"

* "I am now going to subscribe to the Sunday Sport because apparently I am on the front page dressed as Bin Laden."

* Asked if he had any sympathy with M&S chairman Sir Stuart Rose, he said: "None whatsoever."

* "Dave [Forsey, Sports Direct's chief executive] has not worked since the 1980s – I promise you."

* "Chris Ronnie [chief executive of rivals JJB] is potentially in the wrong job. He could have become something in the squash world."

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