Sports Direct has not ruled out taking further punts on rival retailers, despite seeing a £23m drop in the value of strategic investments relating to Tesco and Debenhams.
Dave Forsey, chief executive of the UK’s largest sports retailer, said: “We have a history of strategic stakes and that may or may not continue.”
Under the terms of a put option deal in September, Sports Direct has to pay out if Tesco’s share price falls below the level set at that time, believed to be about 190p. The supermarket’s shares currently stand at 172p.
In November the retailer entered into another derivative agreement relating to shares in Debenhams, which took its interest in the department store group to 12.7%.
The company, led by Newcastle United boss Mike Ashley, said it views the stakes as part of a “wider conversation” with those companies. Both retailers have recently allowed Sports Direct to put outlets in some of their spare retail space.
In a statement filed on Thursday, Sports Direct said it had made a £23.3m downwards adjustment to the value of the two derivative financial instruments at its half-year end in October.
The statement also revealed that Sports Direct’s underlying profits had risen nearly 10% to £161m in the six months to 26 October. That result was at the bottom end of analysts’ expectations as sales of replica football kit were hit by England’s early exit from the World Cup.
Sales rose 6.5% to £1.4bn as the company opened a further eight stores in Europe and 18 in the UK. Online sales rose by 11%. “The results for the six months were solid considering the adverse impact on performance during the period of England’s early departure from the Fifa World Cup in Brazil and the unseasonably mild weather during autumn reducing footfall,” said Forsey.
The company said that trading since the end of October was “in line with management’s expectations”.
Ashley told analysts that the company’s performance had been hit by the warm autumn but perhaps less so than the rest of the UK’s fashion retailers.
He also said Black Friday had been a “nightmare” because it produced a massive spike in sales that was difficult to cope with both online and in stores.
His comments came after other retailers including Marks & Spencer, Tesco and Debenhams all had problems delivering goods ordered by online shoppers in the wake of the Black Friday rush. On Thursday delivery firm Yodel also admitted to problems with a backlog of deliveries and temporarily halted pick-ups from retailers.
Sports Direct said it aimed to open between 30 and 40 stores a year and was extending its Shirebrook head office and distribution centre near Mansfield, Nottinghamshire, to cope with rising sales.
The firm has 434 UK sports stores and 270 elsewhere in Europe, having grown rapidly via acquisitions of failed rivals and unloved brands to dominate Britain’s high streets with its low prices.
In a note, analysts at BESI, Sports Direct’s broker, said: “The keys to the investment thesis here are improving UK and international profitability in sports retail, expanding overseas by acquisition (and less significantly organically) and growing the online business.”
