Why Sports Direct is going upmarket
Shares in sporting goods giant Sports Direct, which now trade on the stock market as Frasers (FRAS), surged on half-year results (16 Dec) which showed a bumper rise in earnings despite testing times for retailers.
The tracksuits, trainers and tennis balls seller also flagged the ‘green shoots of recovery’ at acquired department store House of Fraser and maintained it wouldn’t be on the hook for any material liabilities arising from a £674m Belgian tax enquiry.
Stemming losses at House of Fraser, Sports Direct is full steam ahead with a new strategy. Gross margins are improving as it shifts towards the sale of more premium, higher-priced products, opens new flagship stores and takes existing stores upmarket in order to make them more appealing to third party brands, notably Nike and Adidas.
The Frasers rebrand reflects the new strategy and widening retail offer, including new luxury lifestyle stores.
However, this programme still looks a gamble, given that the retailer’s long-run success has been built on the ‘pile them high, sell them cheap’ mantra.
Sports Direct must therefore ensure it doesn’t alienate both price-conscious shoppers and high-end brand buyers alike.