Bottom Line: Sports Direct designs on retailer will pay off

 
Elizabeth Fournier
AMID yesterday’s M&A frenzy, which saw billions of dollars changing hands across the world, Mike Ashley’s move for a £46m stake in Debenhams looks like small fry.

But as the inimitable Geordie has proved in the past, he’s not a man to be underestimated.

Though not an immediately obvious fit, there are certain parts of the Sports Direct empire that would slot quite nicely with Debenhams’ diverse selection of in-house brands – and with the ailing department store bumping along at lows not seen since the middle of last year, chief executive Michael Sharp should be open to any suggestions that might boost trade.

That’s not to say he should start flooding stores with Ashley’s cut-price offers; this is a tie-up that needs to be carefully managed. In the past year or so Sports Direct has been diversifying away from its natural hunting ground – which has in the past seen it take stakes in rivals JJB and JD Sports – and turning to more fashion-focused acquisitions including Republic and USC. These brands would sit well alongside Debenhams’ existing own brand, Designers At... and concessions, and with 12m square foot of retail space across the UK and Ireland, Sharp shouldn’t have a problem squeezing them in.

It might also benefit from incorporating some of Sports Direct’s more specialist skills – I can’t think of another department store that offers the running gait analysis you get in some of Ashley’s stores, for example.

Investors yesterday were clearly glad that someone – anyone – had bothered to take an interest in Debenhams. As long as Ashley’s interest stays friendly, it could support the shares for some time to come.

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