Sports Direct credits bumper bonuses for jump in profits

Staff at Sports Direct are in line for a bonus worth twice their salary, after the retailer beat its profit target for the second year in a row...

by James Taylor
Last Updated: 19 Aug 2013
Say what you like about Mike Ashley (and most Newcastle United fans have) but he clearly knows his onions: his high street chain Sports Direct has just reported a 32% jump in underlying profits last year - fuelled by a remarkable 6.6% jump in UK like-for-like sales. That's impressive stuff, at a time when most of the high street is running just to stand still. And it's also great news for his staff, who are now in line for share awards worth more than £40,000 - around twice the average annual salary at SD. Indeed, Sports Direct insists that's why they're doing so well. It's certainly not for the quality of its shopping experiece...

Sports Direct said today that it made an underlying profit of £200m in the year to April 24; that's slightly less than the City was hoping for (hence the slight and seemingly harsh dip in its share price this morning). But it's well ahead of its 'ambitious' target of £195m. Clearly the World Cup was a big factor: despite England being so preternaturally rubbish in the event, the usual air of entirely unfounded optimism in advance of the festivities clearly persuaded football fans to splash out on some new kit. Analysts reckon that probably accounted for about £15-£20m of total sales during the period.

But it's not hard to believe that the bonus scheme played a part too. This is the second year in a row that Sports Direct has beaten its profits target, and it may be no coincidence that this is the second year it has been running a bonus scheme that's among the most generous in retail. As a result of this year's over-achievement, staff will get a share pay-out that's currently worth just over £30,000; throw in the proceeds from last year too, and the award is worth almost £44,000. That's pretty good, given the average SD employee earns around £20k - and by the time they can actually cash in these shares next year, they might be worth even more.

It's easy to be sniffy about Sports Direct, with its bargain basement kit and chaotic stores. But it's clearly doing a very effective job of appealing to its customer base, which is why it's leaving rivals in the shade. And Ashley has been so emboldened by his recent success that he's even planning to go upmarket: he's just pulled off a cut-price deal for USC and Cruise, two fashion leisurewear chains, which he's planning to run as a seperate (higher-margin) lifestyle division. Again, it sounds like a stretch - but on today's evidence, you wouldn't bet against him pulling it off.

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