LONDON (Alliance News) - Sports Direct International PLC on Thursday reported a fall in interim profit due to provisions and a weaker gross margin and said it expects these issues will continue to hamper its financial performance in the medium term.
The sports clothing and equipment retailer said it made a pretax profit of GBP140.2 million in the 26 weeks to October 23, down 25% from the GBP187.3 million made a year before.
Revenue rose to GBP1.64 billion from GBP1.43 billion, up 14% and by 4.2% in constant currencies, but gross margin sunk 450 basis points to 40.4% from 44.9% a year before, hit by the devaluation of the pound. The retailer sources many of the goods it sells from overseas.
Profit was hit as well by higher provisions on stock inventory and on international leases and by wage increases for staff. Sports Direct has received criticism for its treatment of staff at its Shirebrook distribution warehouse following reports in late 2015 that workers suffered "Victorian" conditions at the site.
Revenue grew in the UK and International arms in the half-year, but Sports Direct said it continues to expect currency headwinds and the strategic challenges it faces to weigh on its performance in the medium term.
"The last six months have been tough for our people and performance. Our UK Sports Retail business continues to be the engine of Sports Direct, but our results have been affected by the significant deterioration in exchange rates, and our assessment of our risk relating to our stock levels and European stores performance," said Mike Ashley, Sports Direct founder and chief executive.
Separately on Thursday, Sports Direct announced the appointment of David Brayshaw as a non-executive director, a move which follows criticism of corporate governance at the group and the outsized influence of CEO Ashley. Brayshaw is a banking industry veteran, having worked at Barclays Capital and HSBC.
By Sam Unsted; samunsted@alliancenews.com; @SamUAtAlliance
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