'Worst trading on record'
Ashley admits ‘challenges’ turning around House of Fraser
Frasers: a ‘fantastic opportunity’ says Ashley
Retail tycoon Mike Ashley has admitted that Sports Direct faces “significant challenges” turning around House of Fraser.
Sports Direct acquired the collapsed department store chain in August for £95 million and has been engaged in trying to keep as many stores open as possible.
He told investors that trading in November this year was the worst on record and said retailers are likely to be pushed over the edge. “It will literally smash them to pieces,” he said.
In Sports Direct’s half-year figures, he states: “I have made my views clear that I believe the previous House of Fraser senior management team traded the business whilst it was insolvent for a long time, this means we have significant challenges ahead in turning House of Fraser around,
“However, I genuinely believe we have acquired a fantastic opportunity and with the efforts of Sports Direct and House of Fraser teams, and the support of the brands, local councils and landlords, we can turn House of Fraser into the Harrods of the High Street.”
In the 26 weeks to 28 October, Sports Direct said reported a 15.5% rise in first-half core earnings, excluding acquisitions, helped by its strategy to move its brand upmarket. Underlying profit before tax fell 26.8% to £64.4m.
Mr Ashley, who owns 61% of Sports Direct equity, said the performance was impressive in the context of the current struggles in the sector and showed its “elevation strategy continues to go from strength to strength.”
He is aiming to smarten up his stores by stocking more premium products. Sports Direct acquired the freehold of the Frasers store in Glasgow but has closed the store in Princes Street ,Edinburgh.
Debenhams facing fight for survival
Mr Ashley also issued a stark warning about the future of Debenhams in which he has a significant stake through Sports Direct. Shares in chain dropped more than 3% on Wednesday after a letter from Mr Ashley to the retailer’s boss Sergio Bucher claimed the company had “zero chance of survival”.
In the letter, Mr Ashley goes on to urge Mr Bucher to accept a £40m interest-free loan from Sports Direct. He warned that Debenhams faces collapse without urgent action.
He wrote: “If I’m sounding extremely frustrated – well I am. We’ve seen this before, with Blacks and HoF. They didn’t want any help either. We don’t want to see Debenhams fail. It’s not in our interest to see it fail, but without something changing rapidly all of the shareholders risk getting wiped out, never mind diluted.”
Debenhams said in a statement it would not accept the offer as it could affect other shareholders.
“We welcome Sports Direct’s proposal as a clear demonstration of their willingness to support the company,” a representative said.
“However, as the offer came with conditions that could affect the interests of other stakeholders, while the board does not think it could accept the proposal, as presented, it has invited Sports Direct to engage as part of our broader refinancing process.”