Mar 7, 2017
Sports Direct faces 40% surge in European costs
Sports Direct faces a 40 per cent increase in the cost of supplying goods to hundreds of European stores after the expiry of a hedging contract that has shielded the company from the weakening euro. Sports Direct has expanded in Europe with its ranges of low-cost sports gear imported from Chinese factories using brands such as Everlast and Karrimor. Sports Direct revealed on Tuesday that its buying costs, which are often paid in dollars, have been kept low by a hedging contract that locked the exchange rate at $1.46 to the euro, equivalent to a spot market rate last seen in 2011. While Sports Direct had previously indicated that a favourable currency hedge was due to expire, some analysts were taken aback by the extent to which profits in its European business appeared to have been derived from a deal struck in the currency markets rather than its stores. Sports Direct left its sterling exposure unhedged ahead of last June's vote to leave the EU. Its shares fell further than most rivals' in the hours after the result was announced.
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