Sports retailers warn on profits after England's Euro 2008 flop

Click to follow
The Independent Online

Sports retailers took a pummelling yesterday after England's failure to reach the finals of the Euro 2008 Championship.

Sports Direct, which owns the Sports World chain and Lillywhites, and the replica football kit maker Umbro issued profits warnings after the national football team's failure to qualify triggered fears that sales of replica kits would be severely hit.

Shares in Sports Direct, which is majority-owned by the billionaire entrepreneur Mike Ashley, plunged 14.7 per cent to 96p – around a third of the company's 281p float price in February – while Umbro was off 2.3 per cent at 170.5p. JJB also took a hit with its shares down 3.9 per cent at 140p.

Sports Direct has an agreement to buy 65 per cent of all England shirts Umbro expects to sell in the UK, while Umbro makes nearly half of its revenue from the sale of kits.

Umbro said a fall in the sales of the "England Home" jersey would affect turnover in the current year, and added: "The effect on 2008 revenues, though still unclear, will be more pronounced due to a substantial reduction in our expected sales volumes for the new 'Away' jersey."

However, the company's shares gained some support from its £285m takeover by Nike which was agreed last month.

The US giant is today sending out the scheme of arrangement document, which requires investors with 75 per cent of Umbro's stock to vote through the deal. Sports Direct owns a 29.9 per cent stake in Umbro while JJB owns 9 per cent, which means they could potentially block a takeover.

"The best thing going for Umbro is the Nike bid," analysts at Numis said. "Should this bid be derailed for any reason, then we should expect to see the share price fall back closer to 100p."

Analysts said they would be surprised if Sports Direct were to block the bid, given the importance of Nike to its business. John Steven-son, of Shore Capital, said Nike's bid was announced when England were already expected to fail to qualify after losing to Russia in October, "long before Israel provided a lifeline last week", so failure was already priced into its calculations.

It is not just sports retailers that will lose from England's defeat to Croatia. Alex Fovargue, retail director at the finance company Experian, said the loss was bad for the entire retail sector, particularly after such a dire summer.

"There's money to be made from the retail goodwill a strong England sporting performance creates, and brands of all sorts, not just the sporting ones, are now faced with going back to the drawing board," he said.

Jonathan Gabay, of Brand-Forensics, said the loss could affect everyone from market stall traders selling flags, to pub landlords and high street retailers who sell flat-screen televisions.

"The only ones who might actually gain something are travel agents who will see more people spending their cash to escape abroad rather than stay at home watching the matches," he said.