Sports Direct profits rise as it drives sales of higher quality products

The retailer said underlying pre-tax profits rose to £166.4m following gross margin gains in its core sports retail business.

Bosses said the increase of 110 bps to 45.6% during the 26 weeks ended October 25 was helped by a “higher proportion of ‘better’ and ‘best’ group branded products”, as well as ongoing improvements to its store portfolio.

Sports Direct hailed the “impressive achievement” of improving sales against last year’s “strong comparables”, which had been driven by the build-up to the 2014 FIFA World Cup.

Group revenues edged up 0.1% to £1.43bn, as it sports retail business reported a 0.2% increase in sales to £1.23bn during the period.

Branded sales jumped 10.2% to £113m, but its premium lifestyle division reported a 12.2% drop off in sales to £88m. Underlying EBITDA rose 7.6% to £218.5m.

The retailer added that online sales “continue to grow” following a website revamp and the introduction of click-and-collect.

Sports Direct increased its portfolio by 15 stores during the half-year and opened five further concessions in Debenhams department stores. At the year-end, it had 455 stores in the UK excluding Northern Ireland.

It is targeting 30 to 40 new stores by the end of the financial year and has already opened 28 of those during the first half, including nine relocations.

The retailer is also planning further stores in Europe after opening more SportsDirect.com shops in the Baltics and will expand its presence in Ireland after agreeing to acquire the remaining 50% of Heatons – the Irish business already 50% owned by Sports Direct.

It said it expects the purchase to be completed by the end of April 2016.

Sports Direct boss Dave Forsey said: “The group has delivered another excellent set of results particularly given the strong comparable sales generated in the build up to the FIFA 2014 World Cup and after a generally mixed summer for the retail sector.

“Within sports retail our commitment to upgrading our store portfolio continues to deliver gross margin growth and is a significant contributor to our strong EBITDA result. We continue to innovate, refine and improve our customer proposition.

“Trading since the period end has been in line with management’s expectations and, while we retain the ability to invest in margin, inventory and group marketing to deliver long-term sustainable growth, we remain confident of achieving the 2015 share scheme’s revised underlying EBITDA target of £420m.”