Sports Direct to sell in China through ITAT

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The Independent Online

Sports Direct is expanding into China with a deal to sell the company's brands through Chinese retailer ITAT.

Shares in the company, which is controlled by Newcastle United owner Mike Ashley, jumped 6.5p to 112.25p yesterday as investors welcomed the news.

China is one of the world's largest consumer markets with a population of 1.3bn. The move comes months ahead of the Olympic Games, which will be held in Beijing.

Sports Direct, which runs the Sports World chain and the Lillywhites store in Piccadilly, is to invest up to £20m between now and 9 April towards store refits. Sports Direct ranges such as Slazenger, Dunlop, and Kangol will be available through 120 of ITAT's largest outlets through a "store within a store" concept.

"This alliance offers an ideal opportunity to access ITAT's fast-growing store network, and through it, to be able to offer our brands to the Chinese consumer," said CEO Dave Forsey.

Analysts at Kaupthing Singer Friedlander said: "This sounds like an interesting deal that gets them into one of the biggest global emerging markets."

Sports Direct will receive a stream of income based on a percentage of ITAT sales of its brands.

"If the percentage were 10-15 per cent, the arrangement could in time produce EBIT (earnings before interest and tax) of £10m-plus," Kaupthing added.

Sports Direct has come under fire in the City since it floated at 300p last February, netting Mr Ashley £929m. It has been hit by a string of profit warnings and accusations of failing to adequately communicate with analysts.

Shenzen-based ITAT, partly owned by Morgan Stanley unit MS China 5 Ltd, sells clothing through a network of more than 700 stores in 275 Chinese cities. Last July, ITAT announced plans to raise £500m from an initial public offering in Hong Kong this April to fund its expansion.