Ashley swoops with £43m bet on shares in troubled Tesco

MIKE Ashley’s Sports Direct has taken a £43m punt on Tesco, betting that shares in the food retailer will recover from Monday’s profits warning.

The move effectively puts a floor under the share price, which has so far fallen by 17pc this week, yesterday closing down 2.4p at 192.5p, illustrating that Newcastle United Football Club owner Ashley is optimistic about Tesco’s prospects.

‘This investment reflects Sports Direct’s growing relationship with Tesco and belief in Tesco’s longterm future,’ Sports Direct said. The group already has stores in some of Tesco’s retail parks in Europe and this is expected to spread to the UK, analysts at Killick & Co said.

Ashley took a similar punt on Debenhams shares earlier this year, and some of Sports Direct’s brands, which include Dunlop and Slazenger, are being trialled at the department store.

Sports Direct is the UK’s largest sports retailer by revenue, with some 400 stores in the UK and 270 abroad.

In its profit warning, Tesco admitted to overstating profits by £250m and suspended four executives.

But the move by Ashley, pictured, reflects significant support for the beleaguered supermarket, which, despite a grim performance in the summer, still enjoys a hefty 28pc market share. Richard Hunter of Hargreaves Lansdown said: ‘[This week] a whopping 92pc of our Tesco trades have been buys, with almost 30 times the daily average deals of the previous week.

‘Often one of the best times to buy shares is shortly after a big fall, and we have seen a big slide from Tesco.’

Still, sceptics point out that Ashley is holding Sports Direct shareholders to ransom should Tesco continue its downward trajectory. The shares have nearly halved in the past year and former chief executive Philip Clarke stood down in June after his £1bn turnaround plan failed.

Adrian Bailey, chairman of the Parliamentary Business Committee, said that after Tesco’s ‘stratospheric’ profit mis-statement, Clarke might be called to appear before the committee.

Sports Direct (down 22.5p at 637.5p) says its maximum liability regarding the option it has with Goldman Sachs is around £43m.