Sports Direct (lon:spd)
Sports Direct – Are The Wheels Coming Of The Wagon?

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Title: Sports Direct – Are The Wheels Coming Of The Wagon?
Company: SPD - Sports Direct
Share Price Then: 239p
Author: Ian Smith
Date: Tue 16 Jul 2019
Comments: Up until a few years ago I liked Sports Direct, they had a history of trading the old “Pile ‘em high, sell ‘em cheap” model.

The stuff that they were selling was decent enough for the price and a lot of it was “branded”.

Okay the brands were in many cases in my view just historic high status labels on generic products rather than independent businesses with a corporate owner, there were also significant real brands available as well.

All would have been fine if Sports Direct expanded the number of stores but kept the same model, instead they have been on a shopping spree of failed/failing retailers that were up for sale including Debenhams, House Of Fraser, Evans, Game Digital and others as well as sort of bidding for Patisserie Valerie.

On one hand I can see the value Debenhams/House Of Fraser with a combination of premium non owned concessions and Sports Direct owned concessions. The reality though in my local HoF is different, it appears to be going down market, there is a big area with Sports Direct stock setup like a Sports Direct shop, a basic not a luxury layout.

It may be that Mike Ashley knows best, but the Debenhams fiasco, where Sports Direct owned almost 30% of the company and apparently lost the lot because he was unable to deal with the Debenhams directors and lenders would terrify me if I were a shareholder.

The group has about £500m in debt and I get the impression that “The Deal” is the driving factor for the business and nobody has the authority and vision to turn around the just bought businesses.

The recently announced delay to the accounts would also worry me, if they are as bad as the delay suggest they might be then would I want in if the share price dropped rapidly.

A strong reason would be to be holding if the group were to decide to take the company private, but is that likely. After all a private company wouldn’t generate all the publicity that a public one does.

If not, it doesn’t take long for a £500m debt to become unmanageable and a Debenhams like descent in the share price would seem to me to be highly possible.
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