Sports Direct reported a 72.6% drop in pre-tax profits in the first half of the year, to £13.0 million ($26 mm). Revenues were down 7.1% to £668.1 million ($1.34 bn). Retail sales in the U.K. fell 12.9% to £518.4 million ($1.04 bn), while International retail was up 14.6% to £38.5 million ($77.5 mm).
The decline was blamed on dismal summer weather, the England football teams 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 the three million it had originally planned. In addition, it expects 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 other football-related sales.
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 gain by increasing the value of products and delivering continued efficiencies from a new state-of-the-art distribution center. Gross margin also benefited from the lower average U.S. Dollar exchange rate.
