Sports Direct shares crashed as much as 27 per cent on Monday morning after Mike Ashley’s company revealed a £605m unpaid tax bill for House of Fraser, which it bought out of administration last August.
The company’s share price later recovered some lost ground but remained more than 9 per cent down by 9.40am.
Sports Direct repeatedly delayed releasing its results on Friday before finally doing so after the markets had closed. The earnings report revealed problems stemming from the company’s purchase of House of Fraser, including the tax bill from Belgian authorities.
The report was originally scheduled for release two weeks earlier but the company withheld it, blaming complications relating to the House of Fraser acquisition.
Mr Ashley had promised to turn the department store chain into a “Harrods of the High Street” when he rescued it from collapse a year ago. But on Friday his company said that problems at House of Fraser were “nothing short of terminal”.
The company added: “If we had the gift of hindsight, we might have made a different decision in August 2018.”
Sports Direct’s earnings fell 6 per cent in the year to 28 April. Chief executive Ashley said some House of Fraser stores lose money even “on zero rent”.
The company said its underlying earnings before tax were £287.8m for the year. Excluding House of Fraser, underlying earnings were up 10.9 per cent to £339.4m, which fell within the company’s guidance issued in December.
The FTSE 250 business, which also owns Flannels, Evans Cycles and sofa.com among other retailers, also said its chief finance officer, Jon Kempster, will step down on 11 September and will be replaced by his deputy, Chris Wootton.
Sports Direct said Belgian authorities have demanded £605m, which relates to the way goods are moved throughout the EU via Belgium.
Jonathan Pritchard and John Stevenson, retail analysts at Peel Hunt, said: “Friday’s delays and general nonsense weren’t ‘Just Mike’ or maverick or slapstick, they were an exasperating and rude means of avoiding wide analytical questioning on the very disappointing [2019 results].
“The home truths about the core Sports Direct business were pretty shocking and management seems to be out of ideas.
“The elevation programme isn’t currying favour with brands and the shopper has moved away from the core SD.
“This is far more important than any tabloid headlines the chief executive may garner, and probably more share price relevant than the Belgian tax claim.”
