Retailer Sports Direct has revealed a move into the luxury brand market after buying two chains from Scottish retail entrepreneur Sir Tom Hunter for £7m.
Sports Direct, controlled by Newcastle United owner Mike Ashley, will take 80% stakes in USC and Cruise Clothing, both of which specialise in premium brands such as Diesel, Police, Ugg and Adidas.
Sir Tom Hunter, who featured on the Sunday Times Rich List and has a rumoured net worth of more than a £1bn, will keep a 20% shareholding in the two firms.
USC currently has 38 UK stores and generated sales of £70m in the year to end of January, while Cruise has 10 stores and has an annual turnover of about £20m.
Belfast’s USC store recently relocated to Victoria Square Shopping Centre, where there is also a Cruise Clothing outlet.
Sports Direct intends to run the two chains separately from its core business, with Sir Tom Hunter remaining as chairman of both companies.
He has been involved with USC since 2004, a spell that included a controversial pre-pack administration in 2008 when 15 of its then 58 stores closed. He bought Cruise last December for £5m after it went into administration under its previous owner.
Sir Tom said: “This deal will transform the prospects for USC and Cruise and our employees at a time of extraordinary turbulence in the high street.”
The luxury end of the market has been one of the few areas of growth for shops over the past year. Companies such as Burberry, Mulberry and Majestic Wine have all posted bumper profits while those in the middle ground have suffered.
Analyst Matthew McEachran at Singer said the deal gives Sports Direct, which will form a new Premium and Lifestyle division, a credible entry into the premium end of the fashion market at a low price.
The group publishes annual results next week, which are expected to show a surge in profits to £155m on sales of nearly £1.6bn.
The company is now healthily valued at over £1.4bn having seen its share price more |than double over the past 12 months.
Sales have benefited from heavy promotions and the problems at rival JJB Sports. Most of the group's 470 stores trade under its Sports Direct.com fascia, but it also runs outlets trading as Sports World, Lillywhites, Exsports, Gilesports and Field & Trek. Brand names in its portfolio include Carlton, Slazenger and Donnay.