By Thomas J. Ryan
Sports Direct warned October 11 that the extreme swings in the British pound is hitting its profits, and days later announced that its CFO Matt Pearson is resigning to accept another job.
It’s been a bumpy road for the U.K.’s largest sporting goods retailer these past few months. In September, Sports Direct CEO Dave Forsey abruptly quit after three decades at the helm, following the report of disappointing full-year results. Its billionaire founder and owner Mike Ashley took over as CEO.
Pearson, who spent nine years at Sports Direct, will remain on board as acting chief financial officer until December 31, 2016, while Herbert Monteith, a member of the retailer’s finance team, is moving in as interim head of finance.
Sports Direct had anticipated its profits for the fiscal year ending April 2017 would reach approximately £300 million, but that those calculations were based on the assumption that the value of the pound would stay at a rate of approximately $1.30 against the dollar.
After a recent drop in the currency, which was trading around $1.21 on October 11, Sports Direct reduced this fiscal year’s profit target by about £15 million. In addition, if the pound averages $1.20 over the financial year, it may lose another £20 million, company officials said in a statement.
The currency markets have seen significant volatility in the months following the U.K.’s decision to leave the European Union, with the pound trading at 31-year lows for much of this past week. Sports Direct was one of the first U.K. companies to announce that its results would be impacted by the pound’s likely slump following the EU Referendum result. Sports Direct pays for the majority of its product in dollars, which makes it particularly vulnerable to foreign-exchange movements.
The most recent collapse of the pound, referred to as a “flash-crash,” saw the pound-dollar rate plummet from an already low $1.26 to $1.18 in a matter of minutes. The drop was believed to have been caused by automatic trading during the relatively slow British overnight hours, or by an error in data entry.
The earnings-guidance revision comes after the company had to axe staff bonuses this year after earnings of £381 million missed its target of £420 million, as sales slowed and profits fell below expectations.
Sports Direct also owns several prominent global sports brands, including Everlast, Lonsdale, Slazenger and Dunlop.
Photo courtesy Sports Direct
