For the first half of the year things weren’t too bad for Sports Direct shares. Opening at £3.78, they had climbed above £4.30 by mid-July, the stock’s best price for 2 and a half years. Yet since the release of its full year figures a few days later it has seriously struggled.
The headline figure from that report was a 72.5% plunge in reported pre-tax profit to £77.5 million, thanks to an £85 million hit from the firm’s 30% stake in Debenhams. Ashley was clearly fuming with the under-pressure retailer, saying at some point he will be ‘smashing into Debenhams’ to ask why they ‘cannot follow anything that Sports Direct suggests’.
By late November Mike Ashley’s high street stalwart was threatening to duck under £2.80 following a negative note from Berenberg, a level last seen at the start of 2017. And it hasn’t managed to move on from those lows in December, with Sports Direct shares now at a current trading price of £2.88.
Light on detail
The company has been light on details in the months that have followed its full year statement. August saw the announcement of another ailing franchise, House of Fraser, while September saw the ‘retirement’ of chairman, and long-time investor-enemy, Keith Hellawell.
That AGM also saw Sports Direct state that, in response to press speculation, it did not intend to takeover Debenhams at that juncture. As for some actual financial news, it said that it was trading in line with its expectations of achieving ‘between a 5% and 15% improvement in underlying EBITDA’ excluding the acquisition of House of Fraser, which it claimed it would turn into the ‘Harrods of the High Street’.
If Sports Direct is to get investors back on board, then next Thursday’s interim results needs to avoid any nasty Debenhams or House of Fraser-shaped surprises, alongside signs that its annual underlying EBITDA growth will be at the upper end of September’s guidance.
Improvement in UK Sports would also be welcome after a 2% drop in full year revenue, though that might be tough to come by given the current retail environment.
Sports Direct shares have a consensus rating of ‘Hold’ alongside an average target price of £3.47.
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