Troubled chain’s purchase of 50 stores from Eastern Outfitters draws fire from pundits who say foray is badly timed distraction from domestic woes

This article is more than 3 years old

This article is more than 3 years old

Sports Direct has drawn fire from analysts after it entered the US market by buying two loss-making chains for $101m (£78m).

The retailer said on Friday it had received approval from Delaware bankruptcy court to buy 50 stores trading as Bob’s Stores and Eastern Mountain Sports through the bankruptcy process of Eastern Outfitters, the chains’ parent company.

Sports Direct, majority owned by its chief executive Mike Ashley, is under pressure after a Guardian investigation in 2015 into its working conditions and investor criticism of its corporate governance standards.

Analysts said the US acquisition would distract the company from efforts to lift its UK performance.

“We find the timing extraordinary,” analysts at stockbroker Peel Hunt wrote in a research note, downgrading their investment stance to “add” from “buy”. “What is not required, in our view, is a major, and not inexpensive, distraction, 3,000 miles away.”

Analysts at Jefferies, who have a “hold” stance, also questioned the timing.

“The incremental challenge of breaking into the US coincides with the need for a drastic UK repositioning and for European stabilisation. This may be a step too far,” they said.

Sports Direct issued a profit warning in December after a slide in sterling’s value made it more costly for the firm to source its branded goods from Asia. Last month, it said the devaluation of the euro against the dollar would also hit profit margins.

The company has also moved to address corporate governance concerns, announcing this month that it has elected an employee to attend its board meetings.

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Sports Direct said it had expanded its reach in the US by acquiring the stores, which sell sports and casual wear predominantly, as well as outdoor and camping equipment and clothing.

“The acquisition is expected to complete in the first half of May 2017 and will provide Sports Direct with a footprint in US bricks-and-mortar retail and a platform from which to grow US online sales,” the company said.

The US sporting goods sector is being tested by the expansion of online shopping and discount chains. Several retailers filed for bankruptcy in 2016, including Sports Authority, speciality golf retailer Golfsmith International Holdings and sports goods manufacturer Performance Sports Group.

The travails of sports shops reflect the American retail sector as a whole, which has been hit by tens of thousands of redundancies in recent months due to online competition.