Sports Direct International PLC reported double-digit earnings gains in its fiscal year ended April 26, led by healthy margins and top-line increases at its Sports Retail division.
Companywide, revenues grew 4.7 percent to £2.83 billion ($4.4 bn). Group gross margin in the year increased 110 basis points to 43.8 percent.
Underlying EBITDA before including the cost of the company's stock compensation program grew 15.7 percent to £383.2 million ($597.8 mm). Group underlying profit before tax increased 20.5 percent to £300.3 million ($469.5 mm). Underlying EPS for the year increased 21.2 percent to 38.9 pence.
At its Sports Retail segment, sales in the year grew 5.5 percent to £2.40 billion ($3.74 bn), driven largely by growth in the U.K., offset by a weak winter sports season across Europe and adverse foreign currency movements. Sports Retail gross margin for the year increased 170 basis points to 44.6 percent. The increase was primarily attributable to ongoing investment in 'better and best' product ranges, further enhanced by efficiencies gained by our strong supply chain disciplines.”
Sports Retail’s same-store sales, which excludes online, increased 7.4 percent, marking the sixth consecutive year of growth in this key performance indicator. Its comps base numbered 432 stores compared with 339 in fiscal year 2014.
Underlying EBITDA for Sports Retail increased 11.0 percent to £356.8 million ($556.6 mm). Sports Retail division gross margin increased by 170 basis points to 44.6 percent.
The segment has 420 sports stores in the U.K. (excluding Northern Ireland) doing business under the Sportsdirect.com banner, and 270 sports stores in 19 European countries.
CEO Dave Forsey said the improvement came despite the adverse impact on performance of England's early departure from last year's FIFA World Cup in Brazil and the unseasonably mild weather during fall reducing foot traffic during the fall.
During the year, Sports Direct increased its store portfolio in the U.K. by 23 stores and added nine stores to its European store portfolio. Sports Direct also continued to develop large city center format stores.
At its Brands Division, total revenue expanded 4.1 percent to £226.4 million ($353.2 mm). Wholesale revenues were up 4.4 percent to £193.3 million ($301.5 mm), including growth in the challenging U.K. market. Revenues in the U.S. market were in line with expectations and continues to represent 40 percent of total wholesale sales. As a result of cost savings, underlying EBITDA increased 12.9 percent to £34.1 million ($53.2 mm). The segment includes Dunlop, Slazenger, Everlast, Lonsdale, Karrimor, Kangol, No Fear and Firetrap.
At its Premium Lifestyle segment, sales decreased 3.0 percent to £207.6 million ($323.9 mm), due to the closure of money-losing stores. The underlying EBITDA loss for Premium Lifestyle decreased to £7.7 million ($12.0 mm) from £20.4 million due to the benefits of rationalization efforts. The segment includes 130 stores in the U.K. under the Flannels, Cruise, USC and Van Mildert banners.
Looking ahead, Sports Direct said sales so far in fiscal 2016 have been in line with management’s expectations. However, the company revised down its 2015/16 adjusted core EBITDA target to £420 million for the current fiscal year from £480 million. Sports Direct said the former target was “unreasonably challenging” given that “planned acquisitions in FY15 did not fully materialize.” The revised target represents a 9.3 percent gain over fiscal 2015.
