U.K. retailers are warning of a bad holiday shopping season. Mike Ashley, head of the Sports Direct chain, warned that the situation is dire, with lackluster sales unexpected for many retailers.
“November was the worst on record, unbelievably bad. I don’t blame the guys, no one could have budgeted for that,” Ashley said when announcing first half of 2018 financial results for Sports Direct, reported The Financial Times. He said the environment is very bad for retailers and that it “will literally smash them to pieces.” Fashion retailer Bonmarché chief executive Helen Connolly echoed that sentiment, saying the conditions are much worse than during the financial crisis. The report noted that with two weeks left before Christmas, lots of stores are reducing prices to boost sales, which could prompt earnings warnings and retail bankruptcies in the new year. Meanwhile, The Financial Times pointed to a profit warning from Superdry, the fashion company, and weekly sales results from John Lewis, the department store, that were disappointing as further evidence of the retail slowdown ensuing in the U.K.
In the case of Sports Direct, the company issued a follow-up statement noting that while sales in November were poor, that fact was already factored into the company’s forecast for full-year underlying profit to increase between 5 percent and 15 percent. As for its investment in Debenhams, on which it said it lost £76m, Ashley was critical, saying the management of Debenhams turned down help from him — including an offer to increase his stake by 10 percent and/or offer an interest-free loan. “There is no need for that business to fail and wipe out all the shareholders,” Ashley told analysts at the end of Sports Direct’s results presentation, reported The Financial Times. Ashely dismissed a suggestions that he was pushing Debenhams lower so Sports Direct can purchase it on the cheap. Debenhams said it welcomed Sports Direct’s proposal but that the offer came with conditions that could impact shareholders. “While the board does not think it could accept the proposal, as presented, it has invited Sports Direct to engage as part of our broader refinancing process,” the company said, according to The Financial Times.
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