Sports Direct to close non-viable HoF stores
Having delayed the filing of its annual results for then year ended April 28th, Sports Direct has revealed a £40 million decline in its group operating profit and has booked a loss of £54.6 million on its House of Fraser acquisition which will lead to further store closures. Sports Direct is also being pursued over a £605 million tax bill by Belgian authorities. This had led to the resignation of its firm of auditors as well, it is believed, to the resignation of CFO Jon Kempster.
Group sales for the year rose by 10.2 per cent to £3.7 billion, but on a like-for-like basis, excluding new stores, sales had fallen by 1.6 per cent.
Sports Direct has defended its position in respect of the Belgian VAT claim, saying that it was less than probable that material VAT and penalties will be be due in Belgium and added that it had only been informed about a tax audit in Belgium the day before its full year results were due to be published, and that the fine can be contested.
The business admitted that House of Fraser was in terminal decline and that more stores may need to close, on which which Mike Ashley directed blame on the department store chain's former owners for under investing in the business and for "excessive and unsustainable outsourcing and financing."
In respect of House of Fraser, Mike Ashley said: "We have found that the problems are nothing short of terminal in nature," adding: "We have done as much as we could realistically do to save jobs and stores". However he concluded that there are still a number of stores which are currently paying zero rent and that are still unprofitable and that this was not sustainable. He added that the number of retained stores would reduce in the next 12 months.