Sports Direct trading update amid sterling fall and price war

Profits blow the latest challenge to confront the business
Profits blow the latest challenge to confront the business

Scandal-hit retailer Sports Direct is set to update the City on trading this week as the fall in sterling continuea to dominate the retail sector.

Mike Ashley’s Sports Direct is expected to lay bare the impact of the fall in the value of the pound when it reports half year results, with the retailer forecast to take a significant hit.

The group, which has endured a long list of controversies over the past months, compounded its PR problems by failing to hedge against the fall in sterling in the immediate aftermath of the referendum.

A subsequent attempt at hedging turned sour when in October Sports Direct said that “extreme movements” in the pound will result in lower full year profits following a flash crash in sterling’s value.

The company said that full year earnings are expected to come in at £285 million, compared with the £300m it had originally pencilled in.

Andrew Wade, analyst at Numis, said there was limited scope for a profit recovery, also because of “trading underperformance”.

He said: “Wary of the extent to which Sports Direct is being required to change commercially as the major brands demand a better showcase, and notwithstanding some potential gross margin upside in full year 2018 for the business as the brands re-price ranges following recent sterling weakness, we see limited scope for a material profit recovery in the next few years and retain our neutral stance.”

The results will come after a string of controversies for the firm which has seen billionaire Mr Ashley hauled before MPs to be grilled over working conditions, the company host a tumultuous “open day” at its headquarters and its chief executive Dave Forsey quit - only to be replaced by Mr Ashley.