In its delayed annual results, Sports Direct Group has said it would have thought twice about rescuing House of Fraser, after discovering problems at the department store chain that are “nothing short of terminal in nature”.
The Sports Direct Group suffered a 6% fall in underlying EBTIDA to £287.8m in the 52 weeks to 28 April 2019, compared with £306.1m in the same period the previous year. Group revenue at Sports Direct, which also controls French Connection and Flannels, was up 10% to £3.7bn in the same period.
In his chief executive report, Mike Ashley said: “Our acquisition of House of Fraser has led to significant uncertainty as to the future profitability of the group as a whole, albeit not impacting the going concern assessment of the group. There are significant operational and investment issues we are trying to rectify based on the appalling mismanagement of House of Fraser, prior to its acquisition by the Sports Direct Group, that led to its downfall.
“Although we have put significant effort into integrating the business into the Sports Direct operational model, including its processes and KPIs, we are still some way from reaching an operating norm.”
He added that further HoF store closures will follow later this year. Several of the retailer’s locations are currently paying no rent and remain unprofitable, which Ashley called “unsustainable”.
Sports Direct also revealed that it is facing a €674m (£605m) tax bill from Belgian authorities, who are investigating the group’s movement of goods through the country. The retailer said it will enter fiscal mediation with the tax authority and believes it will be able to resolve the issue, saying it was “improbable” that it will end up footing the bill.
Ashley bought House of Fraser for £90m in August last year, and declared his ambition to make the department store “the Harrods of the high street”.