Jul 19, 2018

Debenhams stake prompts 73% slide in Sports Direct profits

Sports Direct is counting the cost of building a large stake in Debenhams, with a collapse in the struggling department store's share price having significantly dented the leisurewear retailer's annual profits. For the year to April 29, Sports Direct's pre-tax profits fell by 73 per cent to £28m. The profitability of its core business of selling discounted sportswear was robust, reflected in an underlying earnings figure that rose 58 per cent to £105m. But the group, which is controlled by billionaire Newcastle United owner Mike Ashley, took an £85m hit as the value of its close to 30 per cent holding in Debenhams, which may lead to renewed scrutiny of Mr Ashley's strategy of taking what he calls "Strategic" stakes in other retailers. Sports Direct also holds around 26 per cent of fashion group French Connection. Sports Direct's sales rose 4 per cent to £3.4bn in the year, although its gross margin dropped 1.4 percentage points to 39.7 per cent. Mr Ashley, for his part, focused on Sports Direct's "Underlying" annual results.

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