Sports Direct International’s rescue of department store retailer House of Fraser appears to have weighed heavily on the group’s first-half profits.

Group underlying profits before tax fell 26.8% to GBP64.4m (US$81m) for the 26 weeks to 28 October. While underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell 4.7% to GBP148.8m. When stripping out the effects of acquisitions and considering currency neutrality, profits were up 14.6%.

Sports Direct Plc acquired House of Fraser in August in a GBP90m, hours after the chain went into administration. The rescue saw the UK high street sportswear chain acquire the business and assets of House of Fraser from the administrators including its House of Fraser stores, the House of Fraser brand and all of the stock in the business.

Group revenues rose 4.5% and, excluding acquisitions and on a currency neutral basis, group revenues were up 0.2%. In its UK sports business, retail revenue was down 0.2% on the back of store closures. It was a similar story in Europe where revenues fell 5% again due to store closures. In the rest of the world, revenues rose 26.2%.

Sports Direct owner Mike Ashley says: “During the reporting period we acquired the trade and assets of House of Fraser. I have made my views clear that I believe the previous House of Fraser senior management team traded the business whilst it was insolvent for a long time; this means we have significant challenges ahead in turning House of Fraser around.

“However, I genuinely believe we have acquired a fantastic opportunity and with the efforts of Sports Direct and House of Fraser teams, and the support of the brands, local councils and landlords, we can turn House of Fraser into the Harrods of the High Street.

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“Outside of the House of Fraser acquisition, the Sports Direct Group has had another successful period reporting a 15.5% growth in underlying EBITDA to GBP180.3m.

“Excluding House of Fraser, we anticipate we will be within our previously communicated underlying EBITDA growth range of 5-15% by year end, including House of Fraser we expect to be behind last year’s result.”

Sports Direct International Plc is the UK’s largest sporting goods retailer by revenue, with a diversified portfolio of sports, fitness, fashion and lifestyle fascias in over 20 countries. The majority of stores are operated under the Sports Direct and USC nameplates, but the group also operates Bob’s Stores and Eastern Mountain Sports in the US, and owns premium fashion chains Flannels, Cruise and Van Mildert.

Commenting on the results, Amy Higginbotham, analyst at GlobalData, said Sports Direct is “not immune” to the challenges of the high street. “Sports Direct blamed its falling retail revenue on store closures and the woes of the UK high street, but its problems are more deep-rooted than this, with UK revenues excluding wholesale only up 0.2% on a comparative of -1.4% for H1 2017/18.

“Though its low prices still appeal to consumers looking for value for money, Sports Direct struggles to compete with trend-led clothing specialists such as, whose boohooFIT range taps into the athleisure trend. It is also falling behind competitors JD Sports (which reported a 6.1% increase in UK sales for its H1) and Mountain Warehouse (which saw a 14% jump in l-f-ls in FY2017/18) which both appeal to younger consumers. Sports Direct should consider working with influencers such as fitness bloggers and sports personalities in order to win new customers and drive brand loyalty.

“Mike Ashley intends to improve the Sports Direct’s multi-channel proposition and drive footfall through the ‘Selfridges of Sport’ strategy which involves improving store appearance. He is also opening flagship stores to create appealing destinations for shoppers which will help the retailer to deliver stronger growth, though it cannot rely on this alone to win customers from its rivals.”