Sports Direct, the U.K. discount sporting goods chain, reported a 73% drop in pre-tax profits in the first half of the year, to £20.1 million. Revenues were down 7.1% to £668.1 million from £719.1 million.

The decline was blamed on dismal summer weather, the England football team’s failure to qualify for Euro 2008 and the tough Christmas trading. Sports Direct said it faced tough comparisons against the 2006 FIFA World Cup.

Sports Direct noted that the last time England failed to qualify for a major football tournament was in 1994, when the business was significantly smaller and less focused on football related merchandise than it is now. It noted that Umbro, the kit provider for the England team, has stated that it will now manufacture only one million new replica England away shirts rather than three million it had originally planned. In addition, it expect sales of other products such as home shirts, shorts, socks, training wear, non-Umbro England products, flags, etc. to be significantly reduced, plus there will be an impact due to the lack of related footfall.

“Although it is difficult to estimate the impact precisely, our initial assessment is that this will impact EBITDA in the full 2008 calendar year by circa £50m (with a range of £30m to £70m) split broadly evenly over financial years 2007/2008 and 2008/2009,” Sports Direct said in its statement.

On the bright side, Sports Direct said it still managed to increase gross margins, by 220 basis points, and expected to beat current market forecasts for the full-year. Gross margins increased to 43.3% from 41.1%, driven primarily by an improvement in the UK retail gross margin to 45.3% from 42.4%. The retailer said it achieved this by increasing the value of products and delivering continued efficiencies from the state-of-the-art distribution centre in Shirebrook. Gross margin also benefited from the lower average dollar exchange rate in the period.

Underlying EBITDA down 16% to £83.6 million. Underlying profit before tax down 35.2% to £52.0 million.

Dave Forsey, CEO, said: “The results reflect a very challenging UK market and the comparative period last year including the football World Cup. These also demonstrate the resilience of our business under such pressures from external factors. We remain determined to adapt our strategy, consolidate our market leading position and develop our strong brand portfolio to drive long-term growth.”