Sports Direct buys 4.6% stake in Debenhams

Sports Direct has acquired a 4.6 per cent stake in Debenhams as the sportswear retailer looks to “explore options at an operational level” with the department store, which last month issued a profit warning after suffering lacklustre festive sales.

Sports Direct Store
A Sports Direct store in Liverpool.

Sports Direct says the £46m acquisition, which took place without the prior knowledge of the Debenhams board of directors, will allow the two companies to “work together…to create value in the interest of both Sport Direct’s and Debenhams’ shareholders”.

In a statement, Debenhams says: “Debenhams is open minded with regard to exploring operational opportunities to improve its performance, alongside its own existing and planned initiatives, in order to create value for all Debenhams shareholders.”

One analyst, who asked not to be named, told Reuters they believe the acquisition was made so Sports Direct can set up concessions for the fashion brands it owns – which include Kangol, Firetrap and Slazenger – in some of the Debenhams’ 156 UK stores to “enhance [their] credibility”. 

Debenhams issued a profit warning on the last day of 2013, blaming heavy discounting over the festive period for a slide in its margins. It now expects profit for the first half of 2014 to be about £85m, down from the £114.7m reported in the same period last year.

Meanwhile, Sports Direct reported a 14.3 per cent increase in profit to £143.1m in the half year period to 27 October – its latest financial update to the city.

Sports Direct’s stake in Debenhams follows its other recent strategic stakes made in retailers and fashion brands including JJB Sports, JD Sports, USC, Republic and Cruise clothing.

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