1037 Wednesday 9 January 2019

Following a build up to Christmas that Mike Ashley described as “the worst in living memory”, UK retailers that have published a recent trading update have delivered mixed, although mainly positive, messages. Sports Direct are not one of the retailers issuing a special trading update following the holiday season however their stock has risen on the bounce of positive High St. talk. At the time of writing, Sports Direct is sitting at 276.30 which marks over a 15% gain in the last 7 days since trading resumed this year.  

This time last year it was a lot easier to compare Sports Direct with its competitors, however since the inclusion of House of Fraser and Evans Cycles to the portfolio, direct comparisons are harder to draw. One way of doing so is to take a rough basket of High St. reporting so far, look at sector performance and conclude from that.

Footasylum

‘Athleisure’ store Footasylum are one of the closest comparable stores to Sports Directs traditional incarnation and their report yesterday stank worse than a well-worn trainer. Though both online (28%) and physical (5%) sales year both up, profit margins were hit hard in order to make the sales and the market did not respond kindly. When trading began, shares tumbled 26.2% lower, but the stock managed to close around 13% down for the day.

JD

Another of SPD’s direct sports competitors is JD, and although they did not report on the Christmas period, like Sports Direct, their 2019 has started very positively and are currently up over 7% on the year.

Next

As retailers Next reported that physical sales fell in the build up to Christmas, analysts were relieved to see a 15.2% rise in online sales had helped the firm avoid any form of disaster from the period. On the back of this news, competitors Marks & Spencer and AB Foods (owners of Primark) also saw their stock buoyed by the news.

Conclusion

The High St. is evolving. It’s not a question of saving, it no longer makes sense to fight online sales, but rather learn how to change and utilise them to better use. Footasylum are an example that pure sales figures at the sacrifice of profits don’t work either. Nobody knows the High St. better than Mike Ashley and the bleak warnings that he gave in December may have just casted enough negativity over the sector to save it from less than glowing results that analysts normally look for.

In terms of Sports Direct specifically, the ’19 stock value looks pretty good so far and we will await the full results as they’re released. It is also worth remembering that M&A is still firmly in Mr. Ashley’s mind and both Debenhams and Hamley’s remain options that could happen in the first half of this year.

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