Sports Direct delays results as House of Fraser deal backfires
British retailer’s shares decline after it blames postponement on complexity of integrating House of Fraser
London — British retailer Sports Direct has delayed publishing its annual results, warning problems integrating its purchase of House of Fraser stores and increased scrutiny of its accounts could affect the financial guidance it gave in December.
Shares in the company, controlled by Newcastle United soccer club owner Mike Ashley, dropped as much as 14% to a seven-month low of 226.2 pence in early Monday trading.
Sports Direct described trading in December as “unbelievably bad”. While it did not give an update on its core sporting goods stores on Monday, it referred to complexities in integrating the House of Fraser (HoF) chain it bought in 2018 and “uncertainty as to the future trading performance of this business”.
“HoF is clearly a disaster area, so this is a serious situation,” independent retail analyst Nick Bubb said.
Sports Direct’s core chain has been a relatively resilient performer in recent years, compared with a string of British retailers that have collapsed in the face of subdued consumer spending and a shift to shopping online.
However, the group has also engaged in a raft of dealmaking that has complicated the business. It recently spent time trying — and failing — to buy department stores group Debenhams, after purchasing House of Fraser out of administration in 2018.
On Monday, the company said it also now controlled video gaming retailer Game Digital, “thereby adding to the complexity of the business”, according to Bubb.
Sports Direct, which is 61% owned by Ashley, said the timing of its results had also been affected by a review by Britain’s accounting watchdog of Grant Thornton’s audit of the company’s results for the year ended April 29 2018.
It said that meant the company had to compile more information than in previous years.
Britain’s Financial Reporting Council last week said all of the country’s leading accounting firms had failed to meet quality targets set by the regulator for auditing company books for a second year in a row, with Grant Thornton and PwC earmarked to join KPMG for tougher supervision.
“Sports Direct believes its accounts and their audit to be at an advanced stage,” it said.
The company had planned to publish results for the year ended April 29 2019, on July 18, but said it now expected to do so between July 26 and August 23.
“Sports Direct would note that its core principles in regards to its financial statements are to be conservative, consistent and simple,” it said.
Ashley had said in December there were significant challenges for House of Fraser, but there was also a “fantastic opportunity” to revive the chain.