Sports Direct core earnings up 12% on upmarket move

British retailer Sports Direct on Thursday reported a 12 per cent increase in full-year core earnings, helped by its strategy to smarten up its stores and sell more premium products.

The sportswear chain, founded and run by billionaire Mike Ashley, who also controls Irish retailer Heatons, made underlying earnings before interest, tax, depreciation and amortisation (ebitda) of £306.1 million (€344 million) in the year to April 29th.

That compares to analysts’ average forecast of £296.8 million, according to Reuters’ data, and £272.7 million made in 2016-2017.

Sports Direct, which has been heavily criticised for its past treatment of workers, its financial disclosure and poor corporate governance, in December forecast full-year core earnings growth of 5-15 per cent.

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Mr Ashley, who owns 61 per cent of Sports Direct's equity and is chief executive, is trying to revive sales and profit growth with smarter stores that sell more premium products from the likes of Nike and Adidas. The retailer calls this its "high-street elevation strategy".

"The elevation strategy continues to exceed expectations," said Michael Murray, head of elevation.

“As the property pipeline and brand relationships accelerate, we are confident in achieving between a 5 per cent and 15 per cent improvement in underlying ebitda for the coming financial (2018-2019) period,” he said.

Shares in the retailer, which have increased 45 per cent over the last year having slumped in 2016, closed on Wednesday at 436.1 pence, valuing the business at £2.35 billion.

Sports Direct's reported pretax profit fell 72.5 per cent to £77.5 million, partly reflecting an £85.4 million charge from its equity investment in department store Debenhams. – Reuters