Sports Direct hit by £605m Belgian tax bill and ‘terminal’ House of Fraser problems
As Sports Direct finally released its financial results yesterday following the close of the market, Mike Ashley admitted it may have been a mistake to buy House of Fraser last year.
The sporting goods retailer delayed announcing its results, which are usually released before the market opens at the start of the day, on three separate occasions.
Read more: Mike Ashley’s silence as Sports Direct fail to release results before trading closes
It was revealed that the company had been hit with a €674m (£605m) bill from Belgium’s tax authority on Thursday, contributing to the delay of results being published, which had originally been due on 15 July.
While the firm said it was in talks to resolve the bill with Belgian authorities, it also admitted it has had difficulty integrating House of Fraser into its empire after purchasing the department store chain out of administration for £90m last August, describing the problems as “terminal”.
“If we had the gift of hindsight we might have made a different decision in August 2018,” it said of its purchase of the department store.
Sports Direct’s underlying profits for the year ending 28 April were down six per cent to £287.8m on the year before.
Although, if House of Fraser is removed from that, income for the rest of its portfolio was up by 10.9 per cent.
The retailer’s full-year sales also grew by 10.2 per cent, reaching £3.7bn.
Sports Direct, which is owned by billionaire Ashley, had vowed to turn House of Fraser into the “Harrods of the High Street” when saving it from administration.
However, on Friday the owner said: “In the short-term you can’t justify it. It’s like buying a broken down car at the roadside – you have to get it to the garage to fix it.
“Long-term, we’d like to think we are hopeful of where we are going.”
There had been plans to close 31 of House of Fraser’s 59 stores, but Sports Direct have suggested that could change or increase, although did not specify how many.
It said: “There are still a number of stores which are currently paying zero rent and that are still unprofitable, and unfortunately this is not sustainable.
“We are continuing to review the longer-term portfolio and would expect the number of retained stores to reduce in the next 12 months.”
It said turning the department store chain around would “not be easy”.
“On a scale out of five, with one being very bad and five being very good, House of Fraser is a one,” the company added.
Sports Direct also said the request they received to pay taxes is to do with how its goods are moved through the EU and taxed in Belgium.
Read more: Sports Direct: What’s gone wrong for Mike Ashley?
It added that its chief financial officer, Jon Kempster, is stepping down after two years in the role, and will be replaced by his deputy, Chris Wootton.
Following the delay to release its results, Sports Direct’s share price plummeted by 3.93 per cent at the close of Friday’s trading to end the session on 229.8p. per share.