Blog: Leonie BarrieSports retailers race ahead

Leonie Barrie | 14 December 2009

Shareholders in two of the UK’s biggest sports retailers were buoyed last week after Sports Direct posted a 39% hike in first-half pre-tax profit and rival JJB Sports named its new chief executive after nearly a year of searching.

The hiring of electronics executive Keith Jones, group retail director of DSG International, is a major relief for JJB Sports, which was dragged back from the brink of administration earlier this year. It also follows the unsettling exit of its previous boss, who was suspended after an investigation into the disposal of his stake in the company.

However, it will be no bed of roses for the new man. The firm’s executive chairman Sir David Jones has been embroiled in controversy over a personal loan, and in September the retailer saw its half-year losses widen to GBP46.0m (US$74.4m).

Sports Direct, meanwhile, raised its full-year earnings guidance on the back of its results, which included a 10.1% jump in revenue. The retailer said it intends to continue its international expansion after global sales rose 22.8%. But it is also setting its sights on South Africa and next summer's World Cup – and the expected upturn in business that comes with every major football tournament.

Inditex, Europe’s biggest clothing retailer and owner of the Zara fashion brand, has also been buoyed by international growth – particularly its aggressive expansion in Asia. While its profit for the first nine months of the year fell 1% to EUR831m, sales rose 6% to EUR7.76bn (US$11.44bn), with rapid growth in China, Japan and South Korea helping to offset a slowdown in Spain.

Japanese retailer Aeon, meanwhile, has ditched its 54% stake in US women’s wear retailer Talbots as part of a deal that will also see the repayment of $491m in debts to Aeon. Under the plans, Talbots will merge with special purpose acquisitions company BPW, and has also agreed a $200m credit line with GE Capital. This should leave it with around $160m of debt.

The deal was announced as Talbots posted a third quarter profit of US$17.2m thanks to tight control of costs and expenses. But sales slipped 13.5% to $308.9m.

T-shirt and underwear maker Hanesbrands has also refinanced its debt to give it more flexibility to focus on growing its business and now says it is looking out for possible acquisitions. The company, whose brands include Playtex, Champion, Wonderbra and Hanes, said its new debt terms allow it to target takeovers in the $200m to $300m range – and that any potential acquisitions would be in core apparel essentials categories.


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