Sports Direct warning over collapse of sterling as profits dip
Sports Direct has warned it will be "impacted significantly" by the collapse in sterling, adding that a weakening economy post-Brexit will hit consumer confidence.
The Mike Ashley owned retailer also reported a dip in full year core earnings, falling 0.5% to £381.4 million. On an underlying pre-tax basis, profits fell 8.4% to £275.2 million - while sales were up 2.5% to £2.9 billion.
The company said: "Since the EU vote, we expect the current political uncertainty, and potential weakness in the UK's short to medium term economic outlook, is likely to act as a continuing drag on consumer confidence.
"When combined with the structural difficulties for UK retailers, including high street footfall, and our exposure to the weakness of the pound against the US dollar (as announced on 24 June 2016), these factors make the current outlook for full year 2017 somewhat uncertain and therefore hard to predict.
"We expect gross margin to be impacted significantly by negative movements in exchange rates in 2017 and beyond, given the recent movements in the US dollar compared with the pound."
Unlike many other businesses, Sports Direct is not hedged against currency movements - meaning the weak pound will impact its product buying power.
Chief executive Dave Forsey described the results as "disappointing" and said Sports Direct has also failed to meet its target for a long-term share-based incentive scheme. He said the firm is now working on a new plan.
Sports Direct also said Mr Ashley has "no current intention of taking the company private", in response to speculation that the Newcastle owner wants to de-list the retailer.
The tycoon was grilled by MPs last month over the retailer's working practices at Sports Direct's Shirebrook warehouse, and the firm said it has "set in motion a review of the specific concerns".
Unite's assistant general secretary Steve Turner railed against Mr Ashley, claiming that Sports Direct's working practices would "shame the pages of a Dickens novel and should have no place in 21st century Britain".
Mr Ashley has previously claimed negative publicity caused by MPs has hit trading.