Outlook at Sports Direct and Primark hit by sterling

● Post-brexit currency turmoil clouds picture ● But exports may get a boost says fashion retailer

Two leading retailers warned yesterday of the repercussions of the plunge in the value of the pound since the referendum vote signalled the UK’S departure from the European Union.

Sports Direct said that it will be “impacted significantly”, adding that a weakening economy post-brexit will hit consumer confidence, as fashion retailer Primark said the depressed pound would hit profit margins at its core UK business.

The warning from Sports Direct, controlled by billionaire Mike Ashley, came as the sportswear group reported a 0.5 per cent dip in annual core earnings to £381.4 million, barely within the guidance of £380m to £420m given January. Overall slaes were up 2.5 per cent at £2.9 billion.

It said that current political and economic uncertainty after Britain voted to leave the EU last month was likely to act as a continuing drag on consumer confidence in the “short to medium term”.

The firm added: “When combined with the structural difficulties for UK retailers, including high street footfall, and our exposure to the weakness of the pound against the US dollar, these factors make the outlook for full year 2017 somewhat uncertain and therefore hard to predict. We expect gross margin to be impacted significantly by negative movements in exchange rates in 2017 and beyond, given the recent movements in the US dollar compared with the pound.”

Sports Direct is not hedged against currency movements – meaning the weak pound will impact its product buying power.

Primark’s owner, Associated British Foods (ABF), said currency movements following Britain’s decision to leave the European Union will have both positive and negative effects.

ABF, revealing that Primark’s sales rose 7 per cent in the 40 weeks to 18 June, said: “Sterling has weakened significantly since the referendum vote. In our next financial year, these rates would have both positive and negative effects on profit.

“There would be an adverse transactional effect on the profit margin on Primark’s UK sales, currently half of its turnover, a favourable transactional effect on British Sugar’s margins and a translation benefit on group profits earned outside the UK, which last year were some 50 per cent of the total.”

The firm is to press ahead with expansion of Primark, earmarking openings in Europe and the US.