Sports retailer's gross margin deteriorated significantly during H117
Companies: Frasers Group PLC
It has been a year to forget for the UK's largest sports fashion specialist Sports Direct. Embroiled in a below minimum wage worker pay scandal, the firm has taken a beating from the press and the government in recent months.
Once a giant of the British high street, the business has lost 60% of its market cap in just 1 year. On Thursday, the FTSE 250 company released its half-year results showing that negative press and currency headwinds have had a damaging effect on its profits.
Whilst Group revenue increased by 14.2% during the period, underlying EBITDA decreased by 33.5% to £145.3m, underlying profit decreased by 57% to £71.6m, and underlying EPS fell more than 60%, to 8.5p.
The firm blamed the deterioration of its gross margin on the devaluation of the Pound post-Brexit, as well as the need to increase the Group's inventory provisions, and increase investment in staff.
Chairman Keith Hellawell blamed an “extreme political, union and media campaign" waged against the firm that he said had damaged its reputation, reduced staff morale, and had influenced customers.
"FY17 H1 has been challenging for our people. Overall, financial performance of the Group has materially declined since the prior period, with further strategic challenges and currency headwinds expected to continue to undermine the Group's financial performance over the medium term...
A major priority of the Board in this period has been to review and improve the working conditions for our people. The Board commissioned Reynolds Porter Chamberlain LLP ("RPC"), an independent legal adviser to the Company, to compile a report on the Company's progress to investigate, review, and where appropriate, address any shortcomings in employee practices."
Whilst CEO and majority owner, Mike Ashley said the past 6 months had been tough for the firm's people and performance, with the UK sports retail business suffering significant deterioration due to exchange rates.
Speaking about the negative press the company has received and the worker pay scandal the firm is embroiled in, Mr. Ashley said:
"What matters most to me is how tough the last year has been for the people who work at Sports Direct. Our people have once again found themselves in the spotlight through no fault of their own, yet they remain hardworking and loyal. It is for this reason that my immediate priority will be to protect the people at Sports Direct..."
Sports Direct's share price fell c.6% in early trading on the results.
