July 17, 2014 / 7:30 AM / 4 years ago

UPDATE 2-Sports Direct makes up with Adidas after row

* FY pretax profit up 20 pct to 249 mln pounds

* Says held “encouraging” talks with Adidas

* No dividend, eyes more acquisitions (Adds quotes, detail)

By Neil Maidment

LONDON, July 17 (Reuters) - Britain’s biggest sporting goods retailer, Sports Direct, posted a 20 percent rise in full-year profit and said it had made up with Adidas AG after a row over supplies of soccer boots and shirts.

Adidas had refused to provide it with the footwear and replica shirts for the teams it sponsored at the World Cup because it was unhappy with the way its goods were presented in the retailer’s sometimes messy stores.

Sports Direct had said Adidas was probably more unhappy with the discount prices it offered - prices that have helped it rise to dominate the British sports market.

But Chief Executive Dave Forsey said on Thursday that recent talks had been productive.

“The recent dialogue with Adidas has been encouraging,” he said. “They are beginning to understand at the top level within their business the efforts we’re making in terms of the stores,” referring to refits and a new flagship outlet in London’s Oxford Street.

“There’s been high-up talks within the groups and we’re encouraged by that and they’re encouraged by what they see.”

The spat is just one of many episodes this year that have kept Sports Direct in the news headlines, largely due to its maverick founder Mike Ashley.

Moves to acquire stakes in British department stores Debenhams and House of Fraser at the start of the year sparked intrigue. This week, a long-running controversy over a massive bonus for Ashley came back into focus.

The Sports Direct board has wrestled for years over how to reward Ashley, who is the driving force behind the company’s success and owns 58 percent of Sports Direct but receives no salary or bonus.

A bonus share arrangement in which he would have shared a 200-million-pound share bonus with staff was finally approved by shareholders two weeks ago in the face of fierce opposition.

But on Wednesday, Ashley surprised everyone by spurning the plan and ruling out any other bonus scheme until 2019.


Forsey refused to comment on Ashley’s motives beyond reiterating Wednesday’s statement that he wanted to ensure the maximum number of shares were available to eligible staff.

Forsey said the u-turn would not effect the likelihood of whether Sports Direct would start paying its first dividends. For now, he said, the company would continue to spend cash on acquisitions instead.

Acquisitions have played a pivotal role in Sports Direct’s brisk growth. It now has around 400 sports stores in the UK and over 200 elsewhere in Europe and owns a raft of brands and fashion chains.

Analysts expect it to step-up acquisitions in mainland Europe, a market worth 40 billion pounds, eight times that of the UK.

“It’s a big market across those 29 countries. We are in 19 of them, some of them with a very small offering, and that is a big opportunity going forward,” Forsey said, declining to comment on whether the firm was close to any new deals.

Sports Direct recently made a move into the UK fitness market, buying 10 gyms from LA fitness. This week it unveiled plans to open stores in Australia and New Zealand.

It has said it expects 30 to 40 UK sports store openings this year and 10 to 15 more in Europe, excluding acquisitions.

Sports Direct reported underlying pretax profit for the year to April 27 of 249.3 million pounds on Thursday, just below an average analyst forecast of 255 million.

Its gross margin grew 180 basis points to 42.7 percent, while revenue jumped 24 percent to 2.7 billion pounds, led by strong underlying trade at its UK sports retail stores, acquisitions in Europe and a 27 percent rise in online sales.

Sports Direct said trading at the start of its new fiscal year was in line with its expectations and reiterated its target of underlying core earnings before share scheme costs of 360 million pounds for 2014/15.

While analysts said the results were strong, some were disappointed that its earnings target had not been raised. Shares in the firm, which are up 17 percent on a year ago, were down 1.5 percent at 703 pence at 0812 GMT.

$1 = 0.5835 British Pounds Editing by Paul Sandle and Tom Pfeiffer

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