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Sports Direct profits fall as Brexit worries weigh Sports Direct profits fall as Brexit worries weigh
(about 2 hours later)
Mike Ashley has told Sports Direct’s board that he has no current intention to take the company private, as the retailer revealed a “disappointing” fall in profits. Mike Ashley has told the Sports Direct board that he has no current intention to take the company private, as the retailer revealed a “disappointing” fall in profits.
Dave Forsey, the chief executive, said: “The group has delivered a disappointing full-year financial performance, impacted primarily by a tough trading environment in the second half across our sports retail businesses.”Dave Forsey, the chief executive, said: “The group has delivered a disappointing full-year financial performance, impacted primarily by a tough trading environment in the second half across our sports retail businesses.”
He said trading in the run-up to the EU referendum had been in line with expectations but warned that the outlook for the coming year was “somewhat uncertain and hard to predict” as a result of the UK’s decision to exit the EU. He said trading in the run-up to the EU referendum had been in line with expectations but warned that there could be no certainty on profit levels for the coming year as the outlook was “somewhat uncertain and hard to predict” in the light of the UK’s decision to exit the EU.
Sports Direct has already warned that its profits could be affected by the drop in the value of the pound against the dollar, which it uses to buy stock in Asia. “Since the EU vote we expect the current political uncertainty, and potential weakness in the UK’s short to medium term economic outlook, is likely to act as a continuing drag on consumer confidence,” Forsey said. Sports Direct has already warned that its profits could be affected by the drop in the value of the pound against the dollar, which it uses to buy stock in Asia. “Since the EU vote we expect the current political uncertainty, and potential weakness in the UK’s short to medium term economic outlook, is likely to act as a continuing drag on consumer confidence,” Forsey said on Thursday.
Despite the gloomy outlook, Sports Direct’s shares soared 13% in early trading on relief that it had not delivered a profits warning, although they later fell back to 291p, up 4%. The price was boosted by news that the group is considering launching a share buyback scheme in the light of the volatility in equity markets following the Brexit vote. The price remains well below its 2014 peak of more than 920p. Analysts at Jefferies said the “margin pain could prove pretty remarkable” for Sports Direct, as it had just finished a two year deal under which it bought dollars at $1.70 to the pound. With sterling now trading at $1.30, the cost of buying goods abroad will increase by more than 20% for the retailer.
Despite the gloomy outlook, Sports Direct’s shares soared 13% in early trading on relief that it had not delivered a profits warning, although they later fell back to 291p, up 4%. The price was boosted by news that the group is considering launching a share buyback scheme amid volatility in equity markets following the Brexit vote. The price remains well below its 2014 peak of more than 920p.
The retailer confirmed it would not be paying a staff bonus and would be looking to develop a replacement scheme after underlying profits, at £381.4m, missed the company’s target of £420m. The bonus plan gives £200m in shares to 3,000 permanent staff if earnings doubled by 2019. Group sales rose 2.5% to £2.9bn, slightly better than expected, after Sports Direct bought the Irish Heatons chain.The retailer confirmed it would not be paying a staff bonus and would be looking to develop a replacement scheme after underlying profits, at £381.4m, missed the company’s target of £420m. The bonus plan gives £200m in shares to 3,000 permanent staff if earnings doubled by 2019. Group sales rose 2.5% to £2.9bn, slightly better than expected, after Sports Direct bought the Irish Heatons chain.
Related: Findel may appoint Sports Direct's Mike Ashley as chairmanRelated: Findel may appoint Sports Direct's Mike Ashley as chairman
Profit margins rose for the group as a whole as it booked big increases at its brands and premium lifestyle chains, which include the USC and Flannels chains. However margins at the group’s sports stores decreased by 1 percentage point in the second half of the year as the company was forced to discount to clear winter stock during unseasonably warm weather. At the pre-tax level, profits fell 8.4% to £275.2m.Profit margins rose for the group as a whole as it booked big increases at its brands and premium lifestyle chains, which include the USC and Flannels chains. However margins at the group’s sports stores decreased by 1 percentage point in the second half of the year as the company was forced to discount to clear winter stock during unseasonably warm weather. At the pre-tax level, profits fell 8.4% to £275.2m.
Andrew Hall, an analyst at Verdict Retail said: “The swirling market conditions and the harsh glare of the media spotlight are illuminating the cracks in the Sports Direct’s performance, even as it continues to invest in its multichannel proposition.Andrew Hall, an analyst at Verdict Retail said: “The swirling market conditions and the harsh glare of the media spotlight are illuminating the cracks in the Sports Direct’s performance, even as it continues to invest in its multichannel proposition.
“There are few positives for Sports Direct to take from this morning’s results, and strong leadership to right the ship is required to prevent the retailer lurching from one bad news story to another.”“There are few positives for Sports Direct to take from this morning’s results, and strong leadership to right the ship is required to prevent the retailer lurching from one bad news story to another.”
Sales at the group’s sports stores, excluding Heatons, rose by just 0.6% despite the opening of 60 new stores in 11 countries. Meanwhile, sales at its premium lifestyle chains slumped nearly 13% as the group closed lossmaking stores.Sales at the group’s sports stores, excluding Heatons, rose by just 0.6% despite the opening of 60 new stores in 11 countries. Meanwhile, sales at its premium lifestyle chains slumped nearly 13% as the group closed lossmaking stores.
The retailer has dropped out of the FTSE 100 after facing criticism over treatment of workers, revealed by a Guardian investigation last year. It has also had difficulties in securing the acquisitions it needed to meet profit targets. The company issued its second profits warning in a year in March. In response to what it said was “repeated press speculation about his intentions with regards to his shareholding in Sports Direct”, the company said Ashley had confirmed to the board of directors that he had no current intention of taking the Sports Direct private, and had “indicated his willingness for the company to confirm this statement publicly”.
In response to what it said was “repeated press speculation about his intentions with regards to his shareholding in Sports Direct”, the company said Ashley had confirmed to the board of directors that he had no current intention of taking Sports Direct private, and had “indicated his willingness for the company to confirm this statement publicly”. The retailer has dropped out of the FTSE 100 after facing criticism over treatment of workers, revealed by a Guardian investigation last year. It has also had difficulties in securing the acquisitions it needed to meet profit targets while sales growth has stumbled. The company issued its second profits warning in a year in March.
Ashley admitted last month that Sports Direct had paid workers in its warehouse below the minimum wage because of delays in security searches of staff. Giving evidence to a committee of MPs in parliament, Ashley said he had already taken measures to address the problem. Ashley admitted last month that Sports Direct had paid workers in its warehouse below the minimum wage because of delays in security searches of staff. Giving evidence to a committee of MPs in parliament, Ashley said he had already taken measures to address the problem and would be continuing his review into workers’ pay and conditions.
HM Revenue & Customs, which polices minimum wage abuses, is investigating the retailer and the company is in talks with its full-time staff about a deal to offer back pay. Ashley has said he wants to buy BHS out of administration but his offers have been turned down as too low. In Thursday’s statement, there was no mention of Ashley’s pledge to MPs that he would look into the “six strikes and you’re out” policy under which workers are sacked for six black marks within six months. There wasn’t any further update on the company policy of docking workers 15 minutes pay for being one minute late for work - something which Ashley told MPs was “unacceptable.”
In the US, the company missed out on hopes of securing a joint bid for the Sports Authority retail chain, losing out to a $15m offer from Dick’s Sporting Goods. HM Revenue & Customs, which polices minimum wage abuses, is investigating the retailer and the company is in talks with its full-time staff about a deal to offer back pay.