Profits hit at Sports Direct as sales fall after closures
MIKE ASHLEY’S Sports Direct has seen half-year profits dented as the retailer flagged that sales in the UK fell following store closures, reduced online promotions and as a result of the Brexit hit pound.
The retailer said that statutory pre-tax profits plunged 67.3 per cent to £45.8m in the 26 weeks to October 29, which Mr Ashley put down to “fair value adjustments and transitional factors such as the disposal of assets”. Last year’s profits were also flattered by the sale of a chunk of shares in rival JD Sports.
UK retail sales fell by 1.4 per cent, mainly due to reduced online promotional activity, store closures and the weak pound pushing costs up.
The tycoon, who also owns Newcastle United, is attempting to reposition the store estate, which he claimed is delivering “spectacular” results. He said: “Our high street elevation strategy is currently delivering spectacular trading performance within our flagship stores.
“We intend to open between 10 and 20 new flagship stores next year.
“Whilst our reported profit before tax has been impacted by fair value adjustments and transitional factors such as the disposal of assets in 2017; our underlying profit before tax remains healthy.”
On an underlying basis, pretax profit rose 22.9 per cent to £88m and sales were up 4.7 per cent to £1.7bn.
The firm said that it expects underlying earnings growth for the full year to come within its forecast range of 5 per cent to 15 per cent.
Shares fell nearly 8 per cent in trading to 353.3p following the update.
Last year the retailer was hit after failing to hedge against the fall in the value of the pound in the immediate aftermath of the EU referendum, leading to a collapse in profits.
It said in its latest trading update that it signed long-term forward hedging contracts in October.