16th Jan 2014 07:57
LONDON (Alliance News) - Sports Direct International Thursday said it has sold its 4.6% stake in Debenhams, acquired only three days ago, and has instead entered into a put option agreement for a 6.6% stake in the ailing retailer.
Sports Direct bought a share in Debenhams Monday after the department-store chain reported a poor Christmas, hit by discounting in the sector in the run up to the key retail trading period. Debenhams said it was open to working with Sport Direct to looks at ways to improve its operating performance.
Monday's move came as a surprise, as Sports Direct had not told Debenhams it would be buying a stake.
Sports Direct said Thursday that it was required to transfer cash collateral to cover its obligations under the put option, and the maximum exposure is around GBP64 million.
The sports retailer said in a statement that it was looking forward to meeting with Debenham's senior management team in the future, and reiterated its intention to be a "supportive stakeholder and create value in the interests of both Sports Direct's and Debenham's shareholders."
Sports Direct is owned by Mike Ashley and has expanded over the last thirty years by snapping up small sports brands and rivals. It has about 560 stores in the UK and 260 stores in Europe, selling sports equipment. Sales in its last financial year were GBP2.19 billion. It has made Ashley, one of the biggest characters in UK retailing, a billionaire, and he is also known for his ownership of Newcastle Utd football club.
Debenhams, meanwhile, had a dire Christmas. Chief Financial Officer Simon Herrick resigned just days after it issued a profit warning, blaming heavy discounting. It said it now expects a first-half pretax profit in the region of GBP85 million, down on last year's GBP114.7 million, and a lower gross margin due to product category mix and higher markdown of its goods. It also ceased a share buyback.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews
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