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”.
You might also like...
House of Fraser suppliers hit out at Ashley’s U-turn
House of Fraser suppliers have told Drapers they fear for the future of the struggling department store chain and questioned if Sports Direct’s Mike Ashley did his due diligence before he bought it.
'Terminal' HoF extends administration period
House of Fraser has extended its administration for a further 12 months, just weeks after owner Sports Direct Group branded problems at the department store as “nothing short of terminal in nature”.
House of Fraser weighs heavily on Sports Direct
Ahead of Sports Direct’s delayed results, expected on Friday, Drapers analyses Mike Ashley’s progress in transforming House of Fraser into the “Harrods of the high street” and integrating it into the group alongside premium fascia Flannels.
Editor's Comment: HoF won't survive without strong supplier relationships
To say it has been a turbulent week for Sports Direct Group is an understatement.
Have your say
You must sign in to make a comment
Please remember that the submission of any material is governed by our Terms and Conditions and by submitting material you confirm your agreement to these Terms and Conditions. Links may be included in your comments but HTML is not permitted.
Readers' comments (3)
darren hoggett29 July 2019 11:33 am
Classic case of greed here. He said HOF was like a broken down car. I’d say more like a burnt out one, but I digress. Ashley also saw the books, but went ahead and bought HOF anyway.
Maybe the master plan of ultimately merging Debenhams clouded his thinking, but HOF was ‘all fur coat and no knickers’ and was hardly a shining diamond.
The best thing he can do is close it down and forget all about it. Don’t throw a penny piece more.
We all make mistakes, but buying what was a consistently unsuccessful retailer and promising to turn it around was pure fantasy, especially in what he knows is a dying high street that in our view will never recover.
Unsuitable or offensive? Report this comment
Anonymous29 July 2019 11:42 am
The experts have been saying for years, the department store business model is dead except in major cities. Surely a man of Mike Ashley's business ability should have realised that.
Unsuitable or offensive? Report this comment
Anonymous29 July 2019 5:57 pm
Ego
Unsuitable or offensive? Report this comment