Mike Ashley's Sports Direct (SPD) jogs 6.5p higher to 722p as the UK's market-leading sports retailer confirms a storming start to the financial year. Brisk first quarter trading beat market expectations yet again as the FTSE 250 retailer continues to gobble up market share, expand internationally and make in-roads with the web.
In a short-but-sweet trading update, the biggest UK sports retailer by sales and operating profits reports overall sales up 18.2% to £613.3 million for the 13 weeks ending 28 July. Gross profits skipped more than 23% higher to £260.1 million, double the rate of growth pencilled by City broker Cantor Fitzgerald.
Driving these marvellous metrics was a strong turn from the £4.3 billion cap's core sports retail business, where sales rose 14.5% to £505.3 million. Having cherry-picked 20 JJB Sports stores from the administrators last year (1 Oct), Sports Direct continued to make hay following the exit of capacity from the market, while the numbers also received a helping hand from recent good weather.
Chief executive officer Dave Forsey also flagged an energetic turn from the Premium Lifestyle business, where sales nigh-on doubled to £57.1 million following the acquisition of 114 Republic stores from the administrator in February.
Despite indications of improving consumer confidence, Sports Direct's highly-competitive pricing is chiming with value-hungry punters, while its wide product range and array of globally-beloved sports and street-wear brands including Dunlop, Slazenger, Everlast and Lonsdale are additional key strengths.
Mansfield-based Sports Direct, whose shares have been boosted by its likely entry into the ranks of the FTSE 100 (expected to be confirmed today), continues its European expansion push. During the quarter, it opened one store in Spain and two in Poland and also acquired (29 May) majority stakes in in two leading sporting goods retailers in Austria and the Baltics.
Following today's update, Cantor's Freddie George sticks with his 'hold' rating and 680p price target and publishes a positive pronouncement on prospects. 'Over the medium term, the company will continue to benefit from capacity coming out of the market and is still, we believe, one of the few UK retailers to have exciting prospects for its domestic business in spite of only minimal space growth.'
The retail number cruncher also notes writes that 'the most significant opportunity, in our view, continues to be the development of the company's on line platform as the company endeavours to be the 'category killer' sportswear and sports product site.'