Friday, November 5, 2010

Sports Direct exercises small-store strategy: sports retailer requiresstores of 2,500 sq ft in suburban locations, as large London shopsbecome increasingly scarce. Aditi Shah reports.(Occupiers).

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The battle for large units on London's high streets is pushing Sports Direct to diversify into small and temporary stores.

Next week the UK's biggest sports retailer is due to sign a 10-year lease on a 2,500 sq ft unit--its smallest to date--in south London.

Sports Direct has previously only looked at stores of between 5,000 sq ft and 10,000 sq ft.

Antony Darbyshire, head of property, says: "We are keen to expand and it has been notoriously difficult to find reasonably sized space on high streets within the M25. Competition for units of between 5,000 sq ft and 10,000 sq ft from supermarkets and pound shops has increased. We have had to look at smaller formats to meet demand."

Darbyshire wants to expand in locations inside the M25 such as Brixton and Tooting in south London, and East Ham and Hackney in east London, where he will consider stores as small as 2,500 sq ft.

Last month it opened it a 7,000 sq ft store in Peckham, south London, and later this month it will open a 4,000 sq ft store in Barking, east London.

"Currently, we have large stores on retail parks, but there are a lot of chimney pots in London we still need to cover," he says.

Over the last 12 months, Sports Direct has been ramping up its expansion plans. Last year it embarked on a strategy to take short-term leases, and opened 27 temporary stores, of which 16 are being or have already been converted to permanent stores on 10-year leases.

Over the next 12 months it plans to open 25 to 30 temporary stores in smaller market towns that it previously would not have considered. It is also looking in towns where it already has a presence, but where there would be potential for both in-town and out-of-town shops.

"Opening stores in towns with high vacancy rates has allowed us to trial the business in locations we would not have naturally considered, while eliminating the risk of a long lease," says Darbyshire.

By arrangement with landlords, Sports Direct occupies the unit on a 12-month "licence", whereby it only pays only rates and no rent and invests up to [pounds sterling]15,000 in fit out.

To protect the landlord, the terms of the lease allow it to demand vacant possession of the unit with one month's notice.

The retailer has had a good year. In the year ending April 2010, Sports Directs sales rose by 6.3% to [pounds sterling]1.5bn and EBITDA (earnings before interest, tax, depreciation and amortisation) increased to [pounds sterling]160m.

To help meet its EBITDA target of [pounds sterling]195m this year, it will need to keep up its expansion.

Source Citation
Shah, Aditi. "Sports Direct exercises small-store strategy: sports retailer requires stores of 2,500 sq ft in suburban locations, as large London shops become increasingly scarce. Aditi Shah reports." Property Week 75.39 (2010): 85. General OneFile. Web. 5 Nov. 2010.
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