Performance-Based Rents Introduced Amid Profit Decline

  • Mike Ashley seeks turnover rents across Sports Direct portfolio
  • Turnover rents linked to store performance
  • Up to 15% of rent paid based on sales
  • Currently applied to new stores and those with expiring agreements
  • Common practice in US for clothing retailers like H&M and Inditex
  • Sports Direct estate includes over 700 stores
  • Pre-tax profits of Mash Holdings plunged by 80% to £20.9m in 2018

Sports Direct owner Mike Ashley is reportedly seeking rent agreements with landlords that will link the rent paid to store performance, according to The Sunday Times. Up to 15% of the rent could be based on store sales, primarily for new stores and those where current agreements are ending. Turnover rents are common in the US among retailers like H&M and Inditex. Sports Direct’s estate consists of over 700 stores including Sports Direct, House of Fraser, and Flannels. Mash Holdings, Ashley’s holding company, saw pre-tax profits drop by 80% to £20.9m in 2018 due to reduced income from Dunlop and JD Sports sales.

Factuality Level: 9
Factuality Justification: The article provides accurate information about Mike Ashley’s reported plans to implement turnover rent agreements and the current financial situation of his holding company. It also mentions the context of similar practices in the US and includes relevant details about Sports Direct’s store portfolio and recent profits.
Noise Level: 3
Noise Justification: The article provides relevant information about Mike Ashley’s plans to implement turnover rent agreements and the decline in pre-tax profits of his holding company. However, it lacks a detailed analysis or exploration of the consequences of these decisions on various stakeholders and does not offer any actionable insights or solutions.
Financial Relevance: Yes
Financial Markets Impacted: Sports Direct, House of Fraser, Flannels and potentially other retailers
Financial Rating Justification: The article discusses Mike Ashley’s efforts to renegotiate rent agreements for his stores, which can impact the financial performance of these companies. It also mentions a decline in pre-tax profits for Sports Direct, affecting its financial situation.
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: Minor
Extreme Rating Justification: There is no extreme event mentioned in the text.

Reported publicly: www.retailsector.co.uk