Following the announcement of Sports Direct’s third quarter results this morning, which revealed group sales increased by just 2.6% to £771m in the 13 weeks to February 18 due to a “weak winter” across Europe, retail analysts give their view.
Anusha Couttigane, senior consultant at Conlumino, said:
“With almost 45% of sales translating into profit, it is clear the value sports retailer’s perpetual investment in margin continues to pay off. Chief executive Dave Forsey has reiterated Sports Direct’s commitment to investing in margin, inventory and group marketing. He also highlighted the challenges presented by recent acquisitions on performance, explaining that its businesses in Austria (Sports Ebyl and Sports Experts) were impacted by a weak winter sports season across Europe.
‘Its fashion segments show evidence of subdued performance, particularly in the group’s premium lifestyle and brand divisions. Premium lifestyle, which has been a flagged as an area of focus for Sports Direct over the past two years, witnessed a marginal decrease in sales, resulting in a gross profit fall of 2.8%. Similarly its brands division, which enjoyed a revenue uplift of 4.8% to £56.9m, nevertheless saw a gross profit decline of 0.9% to £22.1m. That noted, the narrow difference means the brands profit for the period is virtually neck and neck with this time last year.”
Nick Bubb, retail analyst, said:
“It’s been a while since Sports Direct said anything about current trading, with the interims back on Dec 11, so today’s IMS update could have been very revealing, but the news seems a bit mundane: despite sluggish sales growth over the 13 weeks to Jan 25 management is still “very confident” of hitting the target of £360m underlying EBITDA for the year ending in April - which is below the City consensus of £380m. Chief executive Dave Forsey spoke to analysts on a conference call and seemed happy with the progress with integrating the business in Austria, despite the fact that ‘a weak winter sports season across Europe has proved challenging’.”
BESI Research analyst Tony Shiret said:
“We believe the UK business has performed in a satisfactory way; probably positive like-for-likes before online. Although there is not a lot of detail in the IMS, the management comment that they “retain the ability to invest in margin, inventory and group marketing to deliver long term sustainable growth” speaks to the strength of the business model, which is producing strong earnings per share growth while integrating recent major acquisitions.”