Sports Direct takes a hit from House of Fraser rescue

The group's underlying pre-tax profits dropped 26.8 per cent to £64.4 million in the 26 weeks to October 28, the period in which it acquired House of Fraser out of administration.

However, reported pre-tax profits were 62.4 per cent higher at £74.4 million and underlying earnings excluding House of Fraser were up 15.5 per cent at £180.3 million.

Group revenue grew 4.5 per cent to £1.79 billion, reflecting growth of almost 30 per cent in both premium lifestyle sales and non-European retail as well as the £70 million added by House of Fraser.

Sports Direct bought House of Fraser out of administration in August. Since then Mr Ashley has secured deals with landlords to keep around half of the 59 stores open, including Wolverhampton’s iconic Beatties and the House of Fraser stores in Birmingham and Telford.

However, the store in Shrewsbury will close on January 12.

Mr Ashley reiterated his pledge to make House of Fraser the Harrods of the High Street, but said it would be a challenging process.

"I have made my views clear that I believe the previous House of Fraser senior management team traded the business whilst it was insolvent for a long time. This means we have significant challenges ahead in turning House of Fraser around," he said.

"However, I genuinely believe we have acquired a fantastic opportunity and, with the efforts of Sports Direct and House of Fraser teams, and the support of the brands, local councils and landlords, we can turn House of Fraser into the Harrods of the High Street."

Meanwhile, in the UK sports retail segment, which accounts for 62 per cent of group revenue, sales were up by 0.2 per cent.

This reflected growth in online sales but a drop in store revenue, partly due to store closures which were part of the group's elevation strategy as well as the overall challenges facing the high street.

Deputy chief financial officer Chris Wootton said the group was not immune to the problems in UK retail. "It's not all sunshine and roses," he said.

His sentiments echoed Mr Ashley's warning to MPs earlier this month when he said the majority of the high street is "already dead".

Mr Wootton also said that the group's investments in other high street retailers including Debenhams, French Connection and Game were "long-term strategic investments where we're looking to collaborate".

It has long been speculated that Mr Ashley would stage a takeover of Debenhams, in which Sports Direct has a 29.7 per cent stake.