House of Fraser stifles growth for Sports Direct

Preliminary yearly results for Sports Direct indicate that the integration of House of Fraser is weighing heavily on the group. The company may also have to pay 674 million euros to the Belgian tax authorities.

Dead weight?

Total revenue for the Sports Direct group was 3.7 billion British pounds (4.1 billion euros) last year, a 10.2% increase. On the other hand, the gross company profit (EBITDA) was 6% lower this year, mostly due to the difficult integration of House of Fraser. That department store was acquired by Sports Direct last year and the consequences of the takeover were the basis of the delayed presentation of the annual results.

Mike Ashley, founder of Sports Direct, admits it might have been a mistake to buy the bankrupt House of Fraser. “If we had the gift of hindsight we might have made a different decision in August 2018,” he said. The company refuses to predict the remainder of the current financial year, as House of Fraser brought about a lot of insecurity on the future profitability of the entire group.

Tax claim

Besides the issues with House of Fraser, the British concern will also have to deal with the Belgian tax authorities. Sports Direct was asked to pay 674 million euros last month. That sum contains VAT, fines and interests.

The Belgian tax authorities are mostly wondering about the fiscal processing of goods transported into the EU through Belgium. Sports Direct stresses it is not a final assessment and the company will co-operate fully with the inquest.