Ashley buys into China market
Feb 6 2008 by Iain Laing, The Journal
NEWCASTLE United owner Mike Ashley is expanding his Sports Direct retail empire into China under a deal to sell the company’s brands in the Far East.
The firm has agreed a strategic alliance with Shenzhen-based ITAT Group which will see brands such as Slazenger, Dunlop, Karrimor and Lonsdale sold at the Chinese firm’s stores.
The deal will see Sports Direct brands sold in a “store-within-a-store” concept at ITAT’s 120 Super Club outlets. Sports Direct, which owns the Sports World and Lillywhites retail chains, is investing £20m to re-fit the branches and to support running costs.
ITAT has the largest network of multi-brand clothing retail chains in China, operating more than 700 stores across 275 cities. Sales areas will be staffed by ITAT employees.
Sports Direct will supply goods to ITAT on a consignment basis and receive a proportion of the revenues generated. Initial selling areas will be about 250 square metres per store.
The agreement is the latest twist in the turbulent history of Sports Direct International since it listed on the stock market last year. Shares in the company have tumbled from their 300p flotation price after it was hit by falling sales amid a consumer spending downturn.
Trading was also damaged by the England football’s team failure to qualify for this year’s European Championships, which will cost it about £70m.
Sports Direct has faced criticism by City analysts for its poor communication and failure to provide clear trading information. Yet investors welcomed the announcement, sending shares more than 3% higher.
The company has also built a near 30% stake in sportswear firm Umbro ahead of its takeover by US giant Nike.
Sports Direct has bought stakes in a range of retailers including outdoor leisure chain Field & Trek and Blacks Leisure. Other acquisitions include the Scottish outdoor group Nevisport and US boxing equipment maker Everlast, landed for £89m last September.
