Sports Direct Gets a Stab in Back from Own Broker

The Evening Standard (London, England), December 12, 2007 | Go to article overview

Sports Direct Gets a Stab in Back from Own Broker


Byline: MICKEY CLARK

THERE was more bad news for shareholders of Sports Direct Internationaltoday as the shares dipped back below [pounds sterling]1 to trade 434p cheaper at 97p.

Merrill Lynch, the broker that helped bring the Sports World chain retailer tomarket in February at 300p a share, giving it a [pounds sterling]2 billion-plus tag, today cutits rating from neutral to sell, and claimed the shares were now only worth80p.

The downgrading by the company's own broker comes a month after Sports Directwarned that full-year profits were likely to be below last year's [pounds sterling]140 million.Merrill said that indicated there would be a big drop in like-for-like salesand "material" gross margin erosion after the firm had to clear the shelves ofunwanted goods such as England football shirts.

Merrill added that it did not expect things to improve in 2008 and 2009 ,withthe group suffering worse than most from the economic slowdown. The move isembarrassing for the broker, and will draw criticism from shareholders, whohave seen the value of their investment slump by two-thirds. The company is nowworth only [pounds sterling]615 million.

One of the few winners has been founder and chief executive Mike Ashley, whonetted [pounds sterling]929 million from the sale of a 43% stake in the business.

Retail analyst Phil Dorgan at Panmure Gordon has had an 80p value on the sharessince England lost to Croatia last month.

The rest of the market tanked following the overnight quarter-point cut in USprime rates that left the Dow nursing a loss of almost 300 points.

Wall Street investors had been pinning their hopes on a half-point reduction.

The FTSE 100 index slumped 83 points to 6453.9.

Blue Oar analyst Douglas McNeil says it doesn't look good for Stanstedbasedbusiness class-only airline Maxjet, in need of a financial rescue. …

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