Sports Direct Plc Business model Storefrontinstore strategy Displays

Sports Direct Plc

Business model

Storefront/instore strategy • Displays high-end brands at the front of the store • Displays high margins proprietary secondary brands at the back of the store • Slazenger, Everlast, Lonsdale, Karrimor • Targets lower end of market • 468 UK stores/289 overseas stores

The internet is killing bricks and mortar retailers

Internet + bricks and mortar best proposition • Best online retailers have bricks and mortar stores • Some consumers want to hold and feel sporting goods before purchasing • Sports Direct has shorter leases

Too reliant on big name sports brands eg. Nike, Adidas

Sports Direct creates value for sporting brands • Sells off excess inventory • Property purchase scheme will help store profile • “Selfridges of Sport” layout in larger stores • Bosses hates sales decreases

JD Sports is a better retailer than Sports Direct

Sports Direct complements JD Sports • JD Sports: small stores with high footfall (and rents) • JD Sports: new and exclusive ranges

But Mike Ashley is a ******!

Mike Ashley is a successful founder CEO with skin in the game • Started the chain in the 1980 s • Excellent overall record of acquisitions, share repurchases, investments in retailers • Owns 58% of shares outstanding • Inspires loyalty amongst many of his top managers

International expansion

International expansion has been hitherto unsuccessful and this appears unchanging • Latest investment appears characteristic Mike Ashley - assets of $101 million at a discount to book value of $126 million • Since 2007 £ 212 million invested in overseas expansion • Resulted in £ 97 million loss

Valuation

Sports Direct is cheap • Sports Direct is available for 404 p stock price • x 540 m shares outstanding = £ 2. 17 billion • Last year’s profits are £ 134 million (2016 = £ 245 million) • A buyer is paying 7. 5 times an already-depressed EV/EBITDA