Sports Direct has blamed tough comparatives and an £85 million hit from its stake in Debenhams for dragging full-year profits down 72.5%.
The sports retailer said on Thursday that its pre-tax profits plunged to £77.5 million in the year to April 29, from £281.6 million a year earlier.
It was impacted in part by an investment in Debenhams, having increased its total stake to 29.7% during the period.
The company upped its holding in the struggling department store chain in March, bringing it close to a level at which it must launch a takeover bid.
- READ MORE: Dave King blames old Mike Ashley-allied Rangers board and rival fans in outburst over court actions
But a recent reduction in Debenhams’ value meant Sports Direct took an £85.4 million hit as a result – having been offset in part by investment income.
The total loss on that investment was otherwise £98.1 million.
The company also has strategic investments in businesses including Goals Soccer Centres, French Connection, and House of Fraser.
Shares in Sports Direct were down 5.5% at the start of trading.
Sports Direct said comparative figures from a year earlier were tough to match, having been boosted due to its sale of JD Sports shares and the disposal of the Dunlop brand.
The loss of Dunlop also hit revenues from its wholesale and licensing division, which dropped 22.7% to £186.3 million, but the disposal eased operating cost pressures which decreased by 31%.
- READ MORE: Dave King blames old Mike Ashley-allied Rangers board and rival fans in outburst over court actions
But founder Mike Ashley tried to turn attention to the group’s underlying profits.
“I’m pleased that our underlying EBITDA has come in at the top end of our expected range at £306.1 million as we indicated this time last year, and also that the underlying profit after tax has increased substantially to £104.9 million,” he said.
Sports Direct is likely to benefit in the next financial year from the sale of its remaining stake in JD Sports, after the sportswear rival completed its takeover of The Finish Line.
It helped Mr Ashley’s business net £45.2 million in proceeds.
Commenting on the full-year results, analysts led by Liberum’s Adam Tomlinson said it was a “strong outcome”, having been nearly 23% ahead of their own forecasts.
“When one considers the heavy lifting as the strategic shift to the elevated store and online offering continues and the retail backdrop during the year, this is a commendable achievement with revenues marginally higher.
- READ MORE: Dave King blames old Mike Ashley-allied Rangers board and rival fans in outburst over court actions
“Tight control on costs and benefits from infrastructure investment and automation has started to deliver efficiencies in the UK and Europe,” they added.
“A strengthened senior team, a focused and disciplined strategy that places property and brands at the very centre should result in increased customer loyalty, frequency of visit as as merchandising, availability and product lines improve over the next few years.”
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here