Mike Ashley’s sportswear company said in a statement today that it made profits of £119.5m last year, on sales of £1.45bn. The Newcastle United owner was understandably cock-a-hoop about this, as it marks a tenfold increase in profits from £10.7m just a year ago.
On the surface of it, the cut-price sportswear retailer did astonishingly well in the last 12 months. Revenues were up from £1.37bn to £1.45bn but the real medal-winner was the tenfold profit increase for the period which ended in April.
The real question is why? It is obviously managing to shift more stock, with both its UK and international divisions seeing double digit growth. This isn’t all that surprising: consumer spending has picked up a bit anyway, but not so much that people aren’t looking for a bargain. So Sports Direct benefits from being a ‘value’ (i.e. cheap and cheerful) retailer.
Certainly it’s the cheaper stuff that was really flying off the shelf – its brand division, which includes Slazenger and Dunlop didn’t fare nearly as well, posting a 17% drop in sales to £190m.
The bumper results are at least in part due to efforts to cut costs and reduce its net debt by 27.7% – although it remains at a fairly hefty £311.9m meaning that long-suffering shareholders still won’t receive a dividend.
And we don’t fancy their chances of getting one next quarter either. England’s woeful performance in the World Cup meant that the sportswear retailer has been left lumbered with a load of England-branded stock that is likely to perform about as well as Wayne Rooney did when he was sporting the three lions...
Overall, the results are pretty good news for Ashley and Sport Direct. But, even in a sector which is notoriously volatile, a factor of ten in one year is a pretty huge profit swing. Springing that kind of a surprise on the City certainly won’t help steady Ashley’s already mercurial City reputation...
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