Sports Direct Inc. said Bob’s Stores and Eastern Mountain Sports, acquired in bankruptcy proceedings in May 2017, showed £9.2 million ($11.9 mm) in trading losses in the company’s fiscal year ended April 29.

Sports Direct wrote in its financial statement, “Bobs and Eastern Mountain Sports has made a trading loss in year one as Sports Direct Group systems, processes and management are implemented. We expect implementation challenges to continue in year two.”

The report also noted that Sports Direct’s underlying EBITDA for the year reflected £17.5 million ($22.7 mm) of losses arising as a result of fair value accounting adjustments and accounting policy alignments related to the Bob’s Stores and EMS businesses. Representing its entry into the U.S., Sports Direct operates 30 Bob’s Stores and 19 EMS as well as their respective websites.

Companywide, profits at Sports Direct plunged 72.5 percent in its year due to a drop in value of its 29.7 percent stake in Debenhams. The year included an £85.4 million negative impact from its Debenhams strategic investment. The extent of the decline in reported profits also reflected tough comparison as profits in the previous year benefited from the sale of its Dunlop business and JD Sports shares.

Underlying profit in the year, however, jumped 57.7 percent to £104.9 million from £66.5 million.

EBITDA improved 12.2 percent to £306.1 million from £272.7 million. The company had projected growth in underlying EBITDA during FY18 would range between a gain of 5 percent to 15 percent.

Group revenue advanced 3.5 percent to £3.36 billion from £3.25 billion.

Mike Ashley, chief executive, said: “I am particularly pleased that Sports Direct has not only been named among the ten companies with the most improved reputation in the U.K., but also that we were ranked among the top five in an index of international retailers.

“I’m pleased that our Underlying EBITDA has come in at the top end of our expected range at £306.1m as we indicated this time last year, and also that the underlying profit after tax has increased substantially to £104.9m.”

Michael Murray, head of elevation, said: “During FY18, we have seen growth in Underlying EBITDA of 12.2 percent. The elevation strategy continues to exceed expectations. As the property pipeline and brand relationships accelerate, we are confident in achieving between a 5 percent and 15 percent improvement in Underlying EBITDA for the coming financial period.”

Among its segments, U.K. Sports Retail decreased by 2.0 percent to £2,181.5 million, which includes USC fascia sales.

European Sports Retail decreased by 0.1 percent to £637.2 million, including Heatons Republic of Ireland. Premium Lifestyle revenue increased by 42.7 percent to £162.1 million, with revenue in Wholesale & Licensing division down 22.7 percent to £186.3 million.

Rest of World Retail, which includes EMS and Bob’s in the U.S. as well as stores in Malaysia, revenue was £192.4 million, up from £27.7 million. At the close of the year, Sports Direct had 30 Bob’s, 19 EMS and 30 stores in Malaysia.

Group gross margin in the year decreased by 130 basis points from 41.0 percent to 39.7 percent. This was largely due to acquisition accounting as a result of the purchase of the trade and assets of Bob’s Stores and EMS, and increased inventory provisions as all divisions invested in more significant product offerings.

U.K. Sports Retail margin was down slightly at 40.8 percent against 41.1 percent in 2017 while European Sports Retail decreased 250 basis points from 43.3 percent to 40.8 percent. Premium Lifestyle’s gross margin decreased by 190 basis points from 35.2 percent to 33.3 percent. Rest of World Retail margin was 30.0 percent, which includes acquisition adjustments, and that compares with 40.4 a year ago.

Group operating costs decreased 3.6 percent to £1,020.3 million, largely as a result of non-recurrence of such significant provisioning as in FY17, as well as increased efficiencies through a degree of automation in the warehouse and rationalization in continental Europe.

As a result, Group underlying EBITDA (pre-Share Scheme costs) for the year was up 12.2 percent to £306.1 million.

U.K. Sports Retail underlying EBITDA was up 6.5 percent to £277.9 million while European Sports Retail underlying EBITDA was a profit of £14.0 million from a prior year loss of £22.0 million. Premium Lifestyle underlying EBITDA was up 43.2 percent to £6.3 million from £4.4 million; Rest of World Retail was a loss of £22.3 million against positive EBITDA of £2.3 million. Wholesale & Licensing underlying EBITDA increased to £30.2 million from £26.4 million.

Photo courtesy Bob’s Stores