Sports Direct share price declines as sales growth slows

Sports Direct’s (LON:SPD) share price opened marginally lower this morning after the UK’s largest sportswear retailer published its third-quarter trading update. The FTSE 100-listed group revealed a significant slowdown in sales growth, but said it remained ‘very confident’ of increasing full-year profits.

Sports Direct, controlled by founder and Newcastle United owner Mike Ashley, said that group sales for the 13 weeks to January 25 had risen 2.6 percent to £771 million, while gross profit was up 7.6 percent at £346.9 million. A year ago, the equivalent sales growth was significantly higher at 11 percent.
Sales at the company’s main sports retail division, increased 2.7 percent to £643.2 million in the third quarter, compared to 6.9 percent growth a year earlier. Chief executive Dave Forsey cited a “weak winter sports season across Europe” for the slowdown. Sales in Sports Direct’s premium lifestyle division, which includes USC, Republic and Flannels, fell 0.4 percent to £70.9 million, while its brands division registered 4.8 percent growth.

Looking ahead, Forsey said: “While we retain the ability to invest in margin, inventory and group marketing to deliver long term sustainable growth, the Board is very confident of achieving at least our full year internal underlying [operating profit] target of £360m, before the charge for the employee bonus share schemes.” That would mark an improvement on the £311.1 million in operating profits made in the year ended 27 April 2014.

Investors have reacted negatively to Sports Direct’s quarterly performance, sending the group’s shares 0.73 percent lower to 681.46p by 08:08 GMT. According to the Financial Times, the 10 analysts projecting 12 month price targets for the FTSE 100-listed retailer have a median target of 825.00p, with a high estimate of 975.00p and a low of 700.00p. As of 14 February 2015, the consensus forecast amongst 19 polled investment analysts covering Sports Direct has it that the company will outperform the market.
As of 08:59 GMT, Thursday, 19 February, Sports Direct International Plc share price is 686.25p.