Pre-tax profits at Sports Direct have fallen to a six-year low as the pound took its toll, it revealed today – but shares rose as founder Mike Ashley named a new finance boss.
Underlying profit before tax fell 59 per cent to £113.7m in the year to the end of April, from £275.2m the year before.
Meanwhile, group revenue rose 11.7 per cent to £3.25bn, with UK sports retail sales rising 6.3 per cent to £2.14bn, while international sports retail rose 38 per cent to £665.6m and premium lifestyle rose 11.6 per cent to £202.2m.
However, underlying earnings per share fell 68 per cent to 11.4p, while the company confirmed it will not pay a dividend this year.
Sports Direct was also at pains to point out that the impact from foreign currency is expected to stabilise next year – its problems are largely thanks to its decision to hedge its purchases at $1.31, a level the pound has been hovering below since October.
Shareholders seemed pleased by Ashley's decision to hire a chief financial officer: shares rose 5.47 per cent to 317.2p as the market opened.
Why it's interesting
It's been a rough couple of years for Sports Direct, which has grappled with everything from accusations of "Victorian" working practises in its warehouses to a highly damaging court case with a former investment banker, in which its founder has admitted to being a "power drinker" (and been accused of vomiting in a fireplace).
But it was significant this morning that the retailer announced it had hired Jon Kempster as its chief financial officer. Kempster, who has experience of a "wealth of public [companies].... in multinational organisations across multiple sectors", including logistics group Wincanton, will join the board in September.
The company was at pains to point out its new plan to become the "Selfridges" of sport with a range of flagship stores in which upmarket merchandise is displayed artfully, is looking encouraging: earnings before interest, taxation, depreciation and amortisation (Ebitda) at one unnamed store have hit £2.1m, compared with Sports Direct's average figure of £500,000.
Taking that into account, the retailer said it is aiming for five to 15 per cent growth in Ebitda this year.
"However, we will continue to be conservative in managing for the medium to long term, which may result in short-term fluctuations in underlying Ebitda, particularly given the continued uncertainty surrounding Brexit," it added.
What Sports Direct said
Sports Direct is on course to become the "Selfridges" of sport by migrating to a new generation of stores to showcase the very best products from our third-party brand partners. We have invested over £300m in property over the last year, and I am pleased to report that early indications show that trading in our new flagship stores is exceeding expectations.
We will continue to invest and make decisions for the long term, whilst trying to conservatively manage the currency volatility that is reflected in our full-year results. As previously announced, the devaluation of Sterling against the US dollar has led to a significant impact on Ebitda and profits in the full year 2017. We have put in place hedging arrangements to minimise the short-term impact of currency volatility, but like many UK retailers we remain exposed to medium/long-term currency fluctuations. Our results were also impacted by provisions and depreciation charges.
I would like to thank all our people at Sports Direct for ensuring that we continue to move forward together whilst elevating our retail proposition.