Sports Direct says it faces ‘terminal’ problems at House of Fraser
Sports Direct has described the problems at its recently acquired House of Fraser department store chain as terminal in its delayed financial results.
After “looking under the bonnet”, Sports Direct chief executive Mike Ashley said he regretted buying the business and that some of the many problems the business faced included serious under investment in stores and excessive and unsustainable outsourcing and financing. He also blamed past “greed and excess” for the company’s woes.
Sports Direct acquired House of Fraser in August 2018 for £90 million.
Ashley said Sports Direct had done as much as it could to save as many jobs and stores as possible, but that there were still some stores paying zero rent that were unprofitable. This means that the company is expecting close more House of Fraser stores during the next 12 months.
Ashley added: “On a scale out of 5, with 1 being very bad and 5 being very good, House of Fraser is a 1, albeit we are trying very hard to turn the business around this will not be quick and it will not be easy. Even though we do believe there could be a bright future for House of Fraser, and indeed have publicised our Frasers vision which we are very excited about, if we had the gift of hindsight we might have made a different decision in August 2018.”
The financial results reveal that Sports Direct’s revenue grew by 10.2% to £3.7 billion in the year to 28 April, while underlying pre-tax profit climbed by 5% to £143.3 million. Meanwhile, group underlying EBITDA was down 6% to £287.8 million.
Sports Direct has also revealed that it was hit by a payment notice of £674 million from the Belgian tax authorities on 25 July.
The company added: “Sports Direct will investigate further alongside its tax advisors though it believes that it will be able to address the points raised and information requested which Sports Direct believes it maintains as part of its routine books and records keeping and, accordingly management believe, as at the date of signing of the financial statements, that it is less than probable that material VAT and penalties will be due in Belgium as result of the tax audit.”
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