Sports Direct, the U.K. sporting goods chain, reported profits increased more than tenfold in its year ending April 25, to £119.5m ($191 mm). Group revenue grew 6.2% to £1.45 billion ($2.3 bn). Pre-tax profit came in at £119.5 million ($191 mm), against £10.7 million a year earlier. Group gross margin decreased by 20 basis points to 40.6%. Underlying EBITDA up 17.3% to £160.4 million ($290 mm).
In its U.K. Retail segment, sales were up 11.1% to £1.1 billion ($1.8 bn). In December, management had predicted that sales in the second half would be lower than for the same period in 2009, with margin for the year as a whole to be at a similar level to 2009. The actual margin for the second half was lower than expected but this was more than compensated for by higher than expected sales partly arising from the sales generated ahead of the World Cup.
Overall U.K. Retail gross margin for the year fell 120 basis points to 41.3%, impacted by comprehensive promotions and clearance of stock in advance of the FIFA 2010 World Cup. Underlying EBITDA for U.K. Retail climbed 29.6% to £138.7 million ($222 mm), driven by higher gross profit.
In other segments, International Retail sales were up 17.2% to £119.9 million ($192 mm). On a currency neutral basis, the increase was 11.0%. Underlying EBITDA advanced 5.8% to £12.7 million ($20 mm).
In the Brands segment, revenue declined 17.4% to £190.5 million ($305 mm), driven by a deliberate strategy to change the mix of sales from predominantly wholesale to licensing. Wholesale revenues were down 17.8% to £167.3 million ($268 million), partly due to a shift from wholesale to licensing in the North American market for Dunlop golf. Licensing revenues were down 13.8% to £23.2 million ($37 million), due to the cancelation of one significant Everlast license. Sports Direct said tough market conditions, particularly in North America, resulted in decreased licensing income during the year with key licensees leading to a fall in the level of income in excess of the license minimums. Underlying EBITDA in the Brands segment nonetheless increased 11.2% to £19.8 million ($32 mm) due to cost controls.
Regarding recent trends, Sport Direct said sales were “strong as expected” at the start of the World Cup with its largest sales day in history coming during the England/U.S. match. However, sales eventually weakened and “correlated with the poor performance of the England team and the negative mood this created amongst fans and consumers.”
