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Sports Direct acquires 4.6% stake in Debenhams

Sports Direct has acquired 56.8m shares or a 4.63% stake in Debenhams, saying that it wants to work “at an operational level” with the struggling department store.

The sportwear giant said the purchase took place without the prior knowledge of the Debenhams board of directors.

Debenhams said it was “open minded” about working with the UK’s biggest sportswear retailer in order to boost performance.

The department store noted that Sports Direct “intends to be a supportive shareholder”, adding it wants to work with Mike Ashley’s company to “improve its performance, alongside its own existing and planned initiatives, in order to create value for all Debenhams shareholders.”

Debenhams largest share holder is asset management company Schroders which has an 18% stake in the department store, followed by Milestone, the investment vehicle of Landmark Group, which has 7.5% and US quant fund LSV which owns 5% of the company.

The purchase follows a difficult Christmas trading period for the department store, which issued a profit warning last month as gross margins declined “due to product category mix and higher markdown”.

Profit before tax is expected to drop to £85m from £114.7m in 2013.

In December Sports Direct reported a 16.9% rise in underlying pre-tax profit to £146.2m for the six months to October 27, as the retailer said it performed ahead of management’s expectations despite a tough comparative period last year featuring the Olympics.

Readers' comments (2)

  • Oh dear! Any aspirations that Debenhams may of had of going in a more premium direction are in tatters. Brands are going too be even more weary about dealing with the store as they already have a discount image.

    Ironically it could be beneficial in the short term, but Debenhams days of being anything close to a credible, progressive retailer are totally finished.

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  • Frying pan and fire, I suspect suppliers will be hit with a double whammy what with the current board taking their pound of flesh if Debs does get taken private again then SD also doing the same, they have form on this. Not sure what value Sports Direct see in Debs apart from a bit of synergy but it's perhaps easier to keep it going down the discount route rather than someone trying to trade it back up.

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