Profits at Sports Direct plunged by 58.7 per cent to £113.7 million in the year to April 30, becoming one of the high street’s worst victims of the tumbling sterling since the Brexit referendum.
The Mike Ashley-owned sportswear retailer said annual profits had more than halved in its last fiscal year because the weakened pound increased costs faster than it was able to put up prices.
Sports Direct was also hit by what it called “strategic challenges” in its operations on the continent.
However, like-for-like retail sales edged 0.3 per cent higher over the year and total sales grew by 11.7 per cent to £3.2 billion. UK retail revenue increased by 6.3 per cent to £2.1 billion.
Ashley said that while Sports Direct has taken action to limit the impact of the pound’s plummeting value against the US dollar, he warned “we remain exposed” to longer-term economic woes.
The retailer sources most of its products from Asia in US dollars but it was not hedged for the 2016-17 year before the Brexit vote and then erred with a belated hedge.
Despite this, Sports Direct was “optimistic” for the year ahead, targeting underlying earnings growth of between five and 15 per cent.
It said the rollout of a new store format was bearing fruit, with better-than-expected early results.
“However, we will continue to be conservative in managing for the medium to long term, which may result in short-term fluctuations in underlying EBITDA (earnings), particularly given the continued uncertainty surrounding Brexit,” Ashley said.
Sport’s Direct full-year report also came with the announcement that Jon Kempster from supply chain firm Wincanton has been appointed as the new chief financial officer.
The company’s financial troubles have come after months of controversy surrounding Sports Direct and Ashley.
The retail tycoon is currently awaiting the verdict of a court case with an investment banker over a £15 million deal allegedly struck in a London pub, with Mr Ashley still awaiting the verdict.
Prior to that, Sports Direct endured negative press coverage over its alleged working practices at its Shirebrook headquarters in Derbyshire, which saw Ashley being questioned by MPs in an inquiry.