Last updated: December 12, 2013 6:50 pm

Sports Direct in kit battle with Adidas

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Sports Stores Operated By Sports Direct International Plc©Bloomberg

Sports Direct has become embroiled in a fight with Adidas after the German sportswear group banned the retailer from selling Chelsea FC kits next season, while a slowdown in profit growth pushed the company’s shares down sharply.

The sport retailer’s management said that Adidas’s decision was “impossible to understand”.

Management – which includes Mike Ashley, the group’s founder and owner of Newcastle United – said it will fight Adidas’s decision, using its position as the UK’s largest sports retailer as a bargaining chip.

Dave Forsey, chief executive of the recently promoted FTSE 100 group, said: “We have not taken it well, from Mike’s perspective.”

Adidas informed Sports Direct of the move a month ago.

A spokesperson for Adidas said: “This is normal business practice and Adidas has done this before. We’d like to point out that Sports Direct continues to be an important retailer for Adidas.”

The spat emerged as the company reported slowing profit growth for the six months to 27 October, as it cut prices to match rivals’ offers in the run-up to Christmas.

The group said underlying profit before tax rose 16.9 per cent year on year in the 26 weeks to October 27, to £146.2m – well down from 26.4 per cent growth seen in the same period last year. The slowdown comes after a stellar 2012 and start to 2013. Mr Forsey said: “The overperformance hasn’t continued. There is wider retail promotion [than last year].”

News of the slowdown pushed the group’s shares down 12.6 per cent to 674p at the close, having rallied 75 per cent this year.

The UK’s largest sportswear retailer by sales said it would continue to focus on “attractive investment opportunities” and would therefore not look at resuming a regular dividend to investors.

In May, Sports Direct added stakes in an Austrian and a Baltic retailer to its growing international business. It now operates across 19 countries in Europe.

Mr Forsey said the company’s immediate priority was to integrate these two businesses, as well as keep an eye on further acquisitions. “I think history shows that we are very fleet of foot when those opportunities arise,” said Mr Forsey.

Mr Forsey said growth in the first half of this year had been achieved against a “tough comparative” that included the London 2012 Olympics and the European Championships.

Sports Direct’s premium lifestyle division, which includes USC, Republic and Flannels, reported losses of £11.8m due to restructuring and trading losses from its Republic brand, which it bought earlier this year.

Another factor Sports Direct believes has contributed to its success is its employee share incentive scheme, under which about 1,800 staff receive payouts of – in some cases – more than three times annual salary. The executive bonus share scheme also paid out in August, with directors receiving 1m shares each.

Bob Mellors, group finance director, who has been with the company for nearly a decade, will retire at the end of December on health grounds.

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