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Sports Direct cuts profit forecast again after sterling plunge
October 7, 2016 / 2:38 PM / a year ago

Sports Direct cuts profit forecast again after sterling plunge

LONDON (Reuters) - Struggling British retailer Sports Direct (SPD.L) cut its profit forecast for the second time in a month on Friday, saying the latest slump in the pound could wipe up to 35 million pounds off its full-year earnings.

A man walks past a Sports Direct store on Oxford Street in London, Britain July 22, 2016. REUTERS/Paul Hackett

Shares in the firm, 55 percent of which are owned by its billionaire founder and boss Mike Ashley, fell up to 13 percent, taking their losses so far this year to 54 percent.

The warning is the latest blow to a company trying to repair a battered image after it admitted to shortcomings in its working practices.

Its shares also plunged on the day after Britain’s vote to leave the European Union, when the company said it had not hedged for moves in the pound against the dollar. Overnight, sterling dropped to a fresh 31 year low.

Last month, Sports Direct forecast core earnings of about 300 million pounds for its financial year ending April 2017, based on a pound/dollar rate of 1.30. It had made 381.4 million pounds in its 2015-16 year.

The firm said on Friday that in light of sterling’s recent weakness it had entered into a hedging arrangement with respect to the pound/dollar rate.

However, it said sterling’s overnight fall resulted in a “crystallisation of that rate” at 1.19, resulting in a hit of about 15 million pounds to its 2016-17 core earnings forecast.

Sports Direct also warned that if the pound/dollar rate remained at 1.20 on average for the balance of its 2016-17 year its core earnings would be hit by a further 20 million pounds.

At 1605 GMT, sterling/dollar was trading around 1.24.

Reporting by James Davey; Editing by Kate Holton and Mark Potter

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