Talk of the Toon as Ashley snaps up luxury chains

SPORTS Direct, the UK’s biggest sporting goods retailer, is to move into the luxury brand market after buying two chains from Scottish retail entrepreneur Sir Tom Hunter for £7m.

Sports Direct, controlled by Newcastle United owner Mike Ashley, will take 80 per cent stakes in USC and Cruise Clothing, both of which specialise in premium brands.

Sir Tom, who has a rumoured net worth of more than £1bn, will keep a 20 per cent stake in the two firms.

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USC currently has 38 UK stores, including six in Yorkshire, and generated sales of around £70m in the year to the end of January 2011.

It is a multi-branded, young fashion retailer with stores in high-footfall locations and a portfolio of established brands such as G-Star, Ugg, Diesel, and Adidas Originals.

It competes with the likes of Republic and Bank Fashion, part of JD Sports Fashion.

Cruise has 10 stores and an annual turnover of about £20m.

Cruise focuses on luxury clothing and accessories and sells high profile brands including Paul Smith, Hugo Boss and Ralph Lauren.

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Sports Direct intends to run the two chains separately from its core business, with Sir Tom remaining as chairman of both companies.

In addition, Sir Tom will provide advice to the newly established premium and lifestyle division of Sports Direct.

Shares in Sports Direct, which have more than doubled over the last year, closed up 3.5 per cent last night, a rise of 8.4p, to 250.9p.

Sir Tom has been involved with USC since 2004, a spell that included a controversial pre-pack administration in 2008 when 15 of its then 58 stores closed.

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He bought Cruise last December for £5m after it went into administration under its previous own- er.

Sir Tom said: “This deal will transform the prospects for USC and Cruise and our employees at a time of extraordinary turbulence in the high street.”

The luxury end of the market has been one of the few areas of growth for shops over the past year.

Companies such as Burberry, Mulberry and Majestic Wine have all posted bumper profits while those in the middle ground have suffered.

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Analyst Matthew McEachran, at Singer, said the deal gives Sports Direct a credible entry into the premium end of the fashion market at a low price.

The group publishes annual results next week, which are expected to show a surge in profits to £155m on sales of nearly £1.6bn.

The company is now valued at more than £1.4bn.

Sales have benefited from heavy promotions and the problems at rival JJB Sports.

Most of the group’s 470 stores trade under its Sports fascia, but it also runs outlets trading as Sports World, Lillywhites, Exsports, Gilesports and Field & Trek.

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Brand names in its portfolio include Carlton, Slazenger and Donnay.

Analyst Peter Smedley, at Charles Stanley, said: “The acquisitions offer low-risk potential for good long-term profit growth after further investment in the store portfolio and the application of Sports Direct’s powerful operational capabilities.

“We view Sports Direct’s move as a timely investment in a new opportunity ready to go when the economy improves.”

He added that Charles Stanley has always viewed USC as a good retailer but whose financial performance, similar to its peers, has recently suffered due to anaemic consumer appetite and the challenging and highly competitive retail backdrop.

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“We think that Sports Direct’s involvement will give USC the necessary critical mass and operational expertise to drive a real sales and profit opportunity,” he said.

Sports Direct said total group sales for the nine weeks to March 27 rose 10.3 per cent, to £236m, while gross profits increased by 7.3 per cent, to £88m.

The rise of Mike Ashley

Newcastle United owner Mike Ashley established the Sports Direct business after he left school in 1982.

He still controls a majority shareholding in the company.

Mr Ashley left school with only one O-level, in economics, at grade C.

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He bought his first shop in Maidenhead with the help of a loan from his parents.

Mr Ashley was the sole owner of the company until it went public in March 2007.

He was famous for giving his top managers at Sports Direct nicknames from the 1990’s animated film, Toy Story.

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