Sports Direct sales spurt ahead

By This Is Money
Updated: 08:02 EDT, 17 February 2011

Sports Direct is on target to hit its profit forecasts after a further burst of sales growth in recent months.

Bonus joy: Staff are in line for payouts

The sportswear chain said gross sales soared 12% to £416m in the 13 weeks to January 23 and the strong performance continued into February.

Gross profits rose 8% to £167m in the quarter.

Sales growth has sped up since half-year results issued in December revealed an 8% rise in revenues.

The retailer – which is controlled by the owner of Newcastle Football Club, Mike Ashley - said today it will reach its underlying profits goal of £205m in the year to April.

This will trigger an estimated £10.8m pay-out for staff through its bonus scheme, which the firm recently said was partly responsible for its recent strength and would be extended for another two years.

Sports Direct's stock rose 1.4p to 169p in trading today.

Its buoyant trading performance is in stark contrast to the travails of its struggling rival JJB Sports.

Last week, JJB appealed to landlords to agree to a company voluntary arrangement (CVA), under which they would be paid reduced rent on 45 stores earmarked for closure.

The emergency measure was prompted by a period marked by falling sales and a series of investigations by the Serious Fraud Office, the Office of Fair Trading and the Financial Services Authority.

The saga has also seen JJB go cap in hand to leading shareholders, including the Bill & Melinda Gates Foundation Trust, for a £31.5m cash call, which is due to be put to a vote this week.

JJB has been holding takeover talks with suitor JD Sports Fashion, and these are likely to be revived if the rescue plan succeeds.

Meanwhile Matthew McEachran, analyst at broker Singer Capital Markets, said Sports Direct's trading update was 'well ahead of forecast, driven mainly by UK retail sales growth'.

'This is despite the very tough prevailing conditions and is likely to make Sports Direct a stand-out performer over this period,' he added.

The Nottinghamshire-based company owns more than 350 shops in the UK.

The majority of stores trade under its Sports Direct.com fascia but it also runs outlets trading as Sports World, Lillywhites, Exsports, Gilesports and Hargreaves and Field & Trek. Brand names in its portfolio include Carlton, Slazenger and Donnay.

Sports Direct is rolling out a strategy of store improvements, including new merchandising techniques, and openings.