Sports Direct breaks into US market

Sports Direct has snapped up the US sports clothing and outdoor equipment chains Bob's Stores and Eastern Mountain Sports in a $101m (£79m) deal.

The deal gives Sports Direct about 50 stores selling sports and casual wear and camping equipment.

Mike Ashley's chain said the "footprint" in US bricks and mortar retail would give it a "platform from which to grow US online sales".

It has bought the debts of parent firm Eastern Outfitters and lent it money.

Eastern filed for protection from its creditors in February.

In the year to 28 January, Bob's and Eastern Outfitters notched up losses of $26m. The assets of the firms amounted to $126m.

Nicholas Hyett, equity analyst, Hargreaves Lansdown said Sports Direct had picked up a "bargain out of bankruptcy proceedings".

He said Sports Direct had been involved in the US sports retail market before, through its stake in Dick's Sporting Goods, "but this time round it has decided to jump in directly".

However, he added that unlike some of the company's previous investments the "rationale for today's deal is pretty clear. Eastern Mountain will serve as a starter pack, providing the group with feet on the ground from which to launch a wider US strategy, a strategy that looks set to be led by online sales.

Time

Analysts at Peel Hunt were critical of the deal saying they were "rapidly losing patience with the company's lack of ability to stick to a strategy".

In a research report they pointed out that Sports Direct had already vowed to take its UK business more upmarket.

"To us, this should be all-encompassing, and should leave absolutely no management time for anything else," they said.

"What is not required, in our view, is a major (and not inexpensive) distraction, 3,000 miles away."

Nick Hyett also sounded a note of caution: "It's unlikely to be an easy road, many UK retailers have run afoul of the challenging US market."

Zero hours

The retailers shares, which initially rose following the announcement have subsequently fallen.

Sports Direct currently has about 700 sports stores in the UK and continental Europe, more than 400 operating under the Sportsdirect.com name.

It also owns brand names including Slazenger, Lonsdale and Everlast.

Sports Direct has attracted controversy in the UK after coming under fire over zero hours contracts and the disclosure that staff at a warehouse were paid less than the minimum wage.

Mr Ashley, the founder and majority owner of Sports Direct, also owns Newcastle United.