Sports Direct’s House of Fraser rescue was a mistake

Sports Direct says it regrets rescuing House of Fraser in its delayed results, which revealed a £605m ( 674m) tax bill from Belgium authorities, describing the problems at House of Fraser as “nothing short of terminal”. It was in talks with Belgium officials to resolve the tax bill. The full year results had been due to be published on 15 July but were delayed until 26 July in part because of uncertainty over the future trading performance of House Of Fraser.

It is now emerged that Sport Direct which is majority-owned and run by billionaire Mike Ashley, was hit by the tax bill by Belgian authorities on 25 July.

The company said the request of back taxes is linked to the way its goods are moved through out the European Union and are taxed in Belgium.

 

Jon Kempster the CFO is stepping down succeeded by his deputy Chris Wootton.

 

Mr Ashley had vowed to turn House of Fraser into the “Harrods of the High Street” when he bought the department store chain out of administration for £90m last August.

 

Mr Ashley said “ In the short-term you can’t justify it. It’s like buying a broken down car at the roadside – you have to get it to the garage to fix it.” But he said “Long-term, we’d like to think we are hopeful of where we are going”.

 

He paid £90m tp the administrators and has seen his Sport Direct profits reduced by £51m since then. That’s been the cost of keeping House of Fraser going. There are still 54 stores a cull of the stores is about to start. Some carried on losing money even after he had bullied the landlords into charging zero rent.

 

For the year to 28 April, underlying profits at Sports Direct dropped by 6 per cent to £287.8m. However taking out House of Fraser, Sports Direct’s income rose by 10.9 per cent/ Total full year sales grew by 10.2 per cent to £3.7bn.