Sports Direct, which earlier this year agreed to purchase Eastern Mountain Sports and Bob’s Stores in bankruptcy proceedings, has acquired a 7.9 percent stake in The Finish Line Inc., according to a regulatory filing.
The share purchases were made from March 30 through April 13.
The stake would make Sports Direct the fifth-largest shareholder of Finish Line, according to FactSet. Sports Direct, the largest sporting goods chain in the U.K., said it made the purchases for investment purposes.
Shares of Finish Line closed Tuesday at $14.77, up 7 cents. Shares are trading close to its 52-week low of $12.63 versus its high of $24.52. On March 24, shares fell 19.5 percent to reach a six-and-a-half-year low after the company reported earnings that fell well short of guidance due to markdown pressures.
“Towards the end of the quarter we needed to get more aggressive on pricing as the tax shift had a bigger impact on traffic as we expected, which created a highly competitive selling environment,” Finish Line CEO Sam Sato told analysts at the time. “At the same time, elements of our offering didn’t resonate with our customers. This was true in both running and basketball, our two largest categories, where full price selling fell short of forecast.”
In late March, Eastern Outfitters, the parent of Eastern Mountain Sports and Bob’s Stores, reached an agreement with creditors to hold a private sale to Sports Direct rather than hold a bankruptcy auction. On April 13, Eastern Outfitters received court approval to shutter 48 of its 86 stores. Eastern Outfitters filed for bankruptcy in February.
Sports Direct has a history of taking strategic stakes in related companies including Debenhams, JD Sports and the online specialist Findel. In early February, it acquired an 11 percent stake in French Connection. Sports Direct generally holds such stakes for investment purposes rather than takeover intentions, but the publicly held retailer is said to be under pressure to meet its growth targets.
Sports Direct has 420 U.K. stores and owns several brands including Slazenger, Everlast and Karrimor. Mike Ashley, its controversial CEO, who also owns football team Newcastle United, holds a controlling 55 percent stake in the retail chain.
Photo courtesy Finish Line