Friday, 26 July 2019 07:49

Sports Direct In Trouble?

Is Sports Direct about to go into administration? We think there are some worrying signs. It's a real possibility that it could be about to go bust.

We've been planning to write this story for some months but have held off just in case we were wrong, and we still might be. The last thing we want to do is add to worry for staff members or cause false rumours that snowball into investors withdrawing their cash.

Our noses on this first started to switch around a year ago. Sports Direct shares a similar business model to that of several bankrupt companies. This is one where the business keeps growing through purchases of other companies. With Sports Direct, these were brands that had previously gone bankrupt or into administration. In short, lots of investors money keep flowing in, and it's tough to work out how much each part of the company is worth.

We just felt that companies that we so aggressive in acquiring other companies sometimes have things to hide. Sort of like a magician, trying to get the audience to concentrate on the right hand while the left hand is doing something else.

There is no evidence whatsoever that this on its own indicates any problems with Sports Direct. Hence why it only pricked our interest, but we didn't write anything.

SportsDirect Warehouse sale

A few months ago, Sports Direct sold its mega warehouse and signed a 20-year (roughly our memory evades us on the exact time) lease with the new landlords to rent it back. OK, now this is interesting, why would a company that doesn't have cash flow issues do that?

3 Weeks ago, Sports Direct failed to report its numbers to shareholders. They were due to report again this morning and again, have been unable to do so for yet unknown reasons. This is quite unusual in itself.

We can't put our finger on it, but some things aren't quite right with this company. Quick Loans is in an industry where we see a lot of lenders go into administration. This has a very similar feel to it.

Don't be surprised if Sports Direct is the next major high street name to fall either this year or next.