Sports Direct poised to hit target in UK

The owner of retail chain Sports World drew a mixed reaction from the City today, despite revealing it remained on course to hit earnings targets.

Sports Direct International described trading conditions as challenging across its business, but added that it was still confident of delivering the £148m (€187m) expected for underlying earnings in the year to April 27.

However, analysts were disappointed by the company’s failure to provide additional details on sales and how it achieved the earnings figure.

Sports Direct, which is majority owned by Newcastle United chief Mike Ashley, has been criticised in the past for its poor communication with City analysts.

Philip Dorgan, a retail expert at Panmure Gordon stockbrokers, said of today’s update: “One would expect cost and margin control to be offsetting sales pressures – for which management deserves credit.

“However, given that it is not possible to judge the degree to which sales weakness has been offset by other management actions, this is of little use in assessing the company’s prospects or the quality of the management team.”

He said the company’s failure to provide more details was a pity given that the market was warming to the firm after a rocky start to life as a listed company. It has downgraded profits expectations over the year, but pleased investors in January by restoring City targets to around £148m (€186m).

The stock fell 2% – in line with the rest of the retail sector – to 109.5p following today’s brief update.

Shares have tumbled from their 300p flotation price in February of last year after the firm was hit by falling sales amid a consumer spending downturn.

The impact on replica kit sales caused by England’s failure to qualify for Euro 2008 is expected to cost it about £70m (€88m) in lost earnings.

Analysts at Citi today said the company’s retail division was expected to post an 11% fall in annual sales to £1.04bn (€1.3bn), with like-for-like sales off 20% and the contribution from new space adding 9%.

For the brands division, Citi is forecasting an 18% improvement to £203m (€255m). The company owns brands including Donnay, Dunlop and Kangol.