A sporting chance of success

 
Elizabeth Fournier
FOR the past four years, Sports Direct has been a rare bright spot in the UK’s struggling retail sector. Since late 2008 its shares have risen by a staggering 1,500 per cent – up from 32p to yesterday’s closing price of 511.50.

Along the way, chairman Mike Ashley has watched rivals fall by the wayside, and eagerly snapped up the business that sportswear retailers such as the now-defunct JJB Sports and severely depleted Blacks have left behind.

So far, so good. But although Sports Direct has had significant operations in Belgium for several years, its recent expansion plans have been firmly focused on the UK. That changed yesterday, with a significant commitment to several of the continent’s less under-pressure economies – Austria, Estonia, Latvia and Lithuania.

With initial investments of below €100m and plenty of cash in Ashley’s coffers, the acquisitions look small when you consider Sports Direct is expected to make revenues of £2.2bn this year.

But strategically they’re significant. Safe in the knowledge that the UK business is moving in the right direction, management now has its sights firmly set on Europe – a potentially big market for the well-known brands such as Slazenger, Karrimor and Everlast that its added to its portfolio over the past few years.

But there’s a limit to how much further shares can go. Already trading at a price-to-earnings ratio of 15.8 per cent, it looks like some growth is already priced in – investors are unlikely to benefit from adding much more to the pot.