Sports Direct’s pre-tax profit soared in its first half as speculation builds that it is in talks to buy department store House of Fraser.
Underlying pre-tax profit soared 26.4% to £125.1m in the 26 weeks to October 28. Underlying EBITDA, which takes out its share scheme costs, jumped 17.2% to £163.2m while group sales rocketed 33.5% to £1.1bn.
It is understood that the sports giant and its owner Mike Ashley is in talks to buy House of Fraser after the department store’s executive chairman and shareholder Don McCarthy raised the ‘for sale’ flag over the business.
Sports Direct chief executive Dave Forsey would not comment on the growing speculation about the House of Fraser acquisition.
McCarthy, who last week negotiated the sale of jewellery group Aurum, which owns Goldsmiths, Mappin & Webb and Watches of Switzerland, would not comment on sale speculation but insisted to The Guardian that he would look after the interests of all shareholders. He said: “No shareholder is going to be put in a compromising position.”
Department store rival Debenhams has also been tipped as a prospective buyer of House of Fraser.
Forsey said the Olympics played a “significant part” in its profits growth.
He said: “There is no doubt that Team GB’s outstanding performance has helped increase the awareness and popularity of sport across the UK, and that we have maintained our position as the consumers’ champion.”
Sales from its core sports market increased 18.1%, while revenue from its growing international business jumped 11.4%. Sports Direct opened in four new countries over the half.
Sales at the premium lifestyle business it created last year when it acquired USC and Cruise leaped 150.4% to £56.1m.
Despite the sales boost, group gross margin dipped 30 basis points.
The retailer’s online sales continued to soar, growing 54% over the period, and now represent 12.5% of overall sales, up from 9.5% last year.
Forsey said: “The group continues to deliver growth across its divisions and we have maintained our investment in margin, inventory and extra group marketing, while also investing for future growth, particularly in our international and ecommerce divisions.”
The board said it remains confident of hitting its full year underlying EBITDA target of £270m.