Sports Direct full-year profits plunged as it took a £85.4m hit on its near-30% Debenhams stake over the year.

The sports retailer’s pre-tax profit plummeted 72.5% to £77.5m in its year to April 29, however, it said underlying pre-tax profit rose 34.5%.

Sports Direct’s UK sales dipped 2%, 0.6% on a like-for-like basis, but group revenue edged up 3.5% to £3.36bn, driven by markets outside of Europe.

Sports Direct chief executive Mike Ashley said: “I’m pleased that our underlying EBITDA has come in at the top end of our expected range at £306.1m, as we indicated this time last year, and also that the underlying profit after tax has increased substantially to £104.9m.”

Mixed picture

Both UK and European sales fell over the year, however sales outside of Europe soared from £27.7m last year to £192.4m.

Gross margin fell 130 basis points across the group and 80 basis points at its core sports business.

In contrast to the stagnant sports retail sales, revenue from premium lifestyle fascias Flannels, Cruise and Van Mildert jumped 42.7% as it opened more stores and online sales grew. 

Sales from Sports Direct’s wholesale and licensing division fell 22.7% over the year.

New generation flagship stores

Sports Direct invested £140m in property assets over the year as it aims to “elevate” its sports retail proposition. Chairman Dr Keith Hellawell said its new generation flagship stores continued to “outperform our expectations”. 

It opened 15 new generation stores over the year, five of which where regional flagship-style stores with multiple fascias on a single site. These stores try to create a “compelling experience for shoppers”, according to the retailer, and offer a diverse product range from football boots to luxury fashion.

Its latest new-generation store in Thurrock includes a Sports Direct, USC, Flannels, and an Everlast gym.

Sports Direct is aiming to open between 10 and 20 new generation sports stores in its current year, the majority of which will include the new USC concept.

It will also open between six and 12 Flannels stores.

Sports Direct head of elevation Michael Murray said: “During FY18, we have seen growth in Underlying EBITDA of 12.2%. The elevation strategy continues to exceed expectations.

“As the property pipeline and brand relationships accelerate, we are confident in achieving between a 5% and 15% improvement in Underlying EBITDA for the coming financial period.”