Investor's Champion Blog
Provides refreshingly forthright, independent comment on predominantly small cap companies and specialist investment funds. Informed opinion, based on first-hand research, but pulls no punches in exposing management weaknesses.

Pile it high and sell it cheap joins the market

I see that Sports Direct, the pile it high and sell it cheap empire of Mr Ashley floated this week with a market cap of c£2billion.

Having visited Lillywhites for the first time in a several years only last week, I can’t say I’m impressed with things at this jewel in the crown.

In addition to the usual offering of football shirts, sports shoes etc you could have picked up a graphite shafted Dunlop driver (I’m assuming there are some golfers out there!) for £6-that’s less than the cost of two pints of beer from a nearby pub! On this basis I could have picked upa whole set of clubs for under £90 which is pretty amazing. Never mind the quality, this would certainly get a beginner going.

Sports Direct was founded by Mike Ashley in 1982 and has grown to be the UK’s largest sports retailer, both in terms of sales and profitability. In addition to sports shops it owns a number of brands, which it distributes through its own stores and third parties, both in the UK and Internationally.

It now has a total of 465 stores of which 408 are in the UK including Sportsworld, the Original Shoe Company, Giles Sports, Hargreaves, Streetwise, McGurks, Exsports and Lillywhites.

The group owns, either outright or through majority stakes brands such as Antigua, Carlton, Donnay, Dunlop, Kangol, Karrimor, Lillywhites, LA Gear (by licence), Lonsdale, No Fear, Slazenger, Title and Voodoo Dolls. It also licenses its brands to third parties; and, in the last financial year, Dunlop, Lonsdale and Slazenger together contributed over £10m of licensing income. Overall, the wholesale business in the last financial year had sales of £166m, generating operating profits of £18.7m.

Mr Ashley and his team have clearly done a great job growing the business over the last 25 years. I just can’t believe that Lillywhites in the heart of the West End has a long term future as a glorified warehouse. Clearly it isn’t viable to return this once mighty sports emporium to its former glories but surely they can do better than the current offering!

It might be great for the beginner to pick up a set for under £90 but will he or she be inclined to return.

Still what do I know about retailing sports goods!
Good luck to Mike and his team. I hope the market treats them well.


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