Sports Direct rebrands and touts rapid growth
Sports Direct forecast core earnings growth of as much as 15pc this financial year helped by signs of a turnaround at department store House of Fraser, as investors backed a plan to change the group's name to Frasers Group.
Problems integrating House of Fraser, which Sports Direct bought out of administration last year, have dragged on the group's earnings, with founder, CEO and controlling shareholder Mike Ashley saying that the £90m (€107m) purchase may have been a mistake.
For the 12 months to April 26 2020, Sports Direct said it expects underlying core earnings (ebitda) to grow between 5pc and 15pc to £356m - £390m from £339m made in the previous year.
Shares in the company soared by almost 30pc, hitting their highest in nearly four years.
Please log in or register with Independent.ie for free access to this article.
Sports Direct had declined to give forward-looking guidance in July, blaming the uncertain impact of House of Fraser on its bottom line.
But yesterday it said it had stemmed losses at the department store chain by rectifying mistakes made by its previous management, cutting costs and changing the product mix to one that generated higher margins.
"We are starting to see the green shoots of recovery as we continue to integrate the business into the group," non-executive chairman David Daly said in a statement.
The company said that despite the improving performance, a number of House of Fraser stores were financially unsustainable and some were likely to shut.
Liberum analysts called the first-half results "very strong" and said that given the outlook, Sports Direct's market capitalisation was too low.
The group's name change reflects a wider retail offering which includes new Frasers luxury lifestyle stores.
Losses in the premium unit, which includes upmarket fashion store Flannels, narrowed to £5.6m in the half year to October 27 from £29m a year earlier.
A 71pc rise in earnings in its European retail business also helped boost half-year results.
Sports Direct said the clear outcome of the UK's parliamentary election last week would make the market more predictable. Cost savings at the group, which has recently added Game Digital UK, Evans Cycles and Sofa.com to its portfolio, would help boost profits, it said.
The group repeated its belief that it would not be on the hook for any "material liabilities" from a €674m bill from Belgium's tax authorities and that it was seeking a resolution as soon as possible.