Sports Direct has lined up a deal to acquire Irish department store group Heatons, as tipped by Retail Week. What do the analysts think?

Sports Direct

“This looks like a perfectly sensible deal: Heatons is well known to Sports Direct, and the Sports Direct brand is well known in Ireland. On a low double-digit multiple there is limited risk here but this is not the game-changer that Sports Direct has been promising and with core forecast momentum still profoundly negative, the shares hold no appeal to us whatsoever: we stick with a sell.

“It’s a worthy and probably slightly enhancing deal. But there are much bigger issues surrounding Sports Direct at the moment. It has clearly stated that it wishes to be acquisitive and management is in active mode, what with today’s deal and the stake it took last week in Findel (it’s still unclear whether this was an attempt to stop Kitbag being sold, or a genuine statement of intent towards the group). 

“We expect a major deal (£100m plus) by the end of the year.

“Of much more interest is the lack of momentum within the core business. We think that the current media fashion towards “exposing” the practices within Sports Direct are at best tedious, but sometimes mud sticks to retailers and sales growth is very poor anyway.

“The key issues we think are the lack of high store standards and exclusive third-party product within the stores. The strategy suggests that the long established lower service, value-driven approach that Sports Direct has taken incredibly successfully over the years is becoming outdated. That’s a big statement but this is a big issue for Sports Direct and one it must solve quickly.” – Jonathan Pritchard, Peel Hunt

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“The focus, in our view, should be on strategic acquisitions rather than on opportunistic investments, developing more broadly the business overseas and growing online sales. This acquisition is encouragingly strategic and in our view and should be viewed as positive. We are maintaining our hold recommendation.” – Freddie George, Consumer General Retail Research