Sports Direct’s winning run at an end as shares tumble

The run of form that has taken Mike Ashley’s sportswear empire into the City’s big league was checked yesterday despite more strong profits.

Shares in Sports Direct International dived by as much as 10 per cent after half-year results missed the elevated expectations of some analysts.

The company, which has 409 stores in the UK and also operates in 19 other countries, added that trading in recent weeks has returned to more normal levels, following the strong performance in which it grew profits by 17 per cent to £146.2m in the six months to October 27.

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The company – controlled by Newcastle United owner Mr Ashley – secured promotion to the FTSE 100 Index in September following a 70 per cent leap in its share price.

However, investors opted to lock in profits yesterday after the recent strong run, although broker Citi reiterated its ‘buy’ rating on the stock.

Sports Direct believes much of its success is down to the positive impact of a lucrative bonus scheme, which recently rewarded around 2,000 staff with shares worth more than £68,000. Today’s performance keeps the company on track to meet targets under a new four-year bonus scheme, due in the summer of 2015.

Chief executive Dave Forsey said: “We have delivered another strong performance reflecting our continued focus on providing customers with exceptional quality and unbeatable value – reinforcing our position as the consumer champion.”

The company said sports retail revenues increased 13.4 per cent to £903.3m in the half-year, driven by online growth of 43 per cent to £158m, representing 15 per cent of total sales. Earnings in the division rose 17 per cent to £168.4m.

Its brands arm, which includes Slazenger, Donnay and Karrimor, saw revenues decrease 0.7 per cent to £106.2m in the six months.

The group now wants a greater presence across Europe where it operates in 19 countries, and reiterated yesterday that it would not resume paying a regular dividend while it evaluated investment opportunities.

“Solid delivery from Sports Direct but the rhetoric on current trading is not as bullish as usual and we are shaving forecasts (admittedly from the top of the range),” Oriel Securities said.

“The shares’ momentum is unlikely to persist given the inline nature of the results.”

The company also announced yesterday that finance director Bob Mellors is to retire at the end of December on health grounds. He has held the role since 2004.

Mr Ashley established the business on leaving school in 1982 and was the sole owner until the group’s stock market listing in March 2007.

He netted £929m in the flotation but as executive deputy chairman he receives no remuneration from the company.