Billionaire Mike Ashley's Sports Direct International (SPD) is bid up 9.5p (1.4%) to 696p after reiterating full-year EBITDA guidance. Reassurance compensates for disappointing third quarter sales impacted by a poor winter skiing season.

A brief update from the UK's leading sports retailer flags 2.7% retail sales growth to £643.2 million for the 13 weeks ending 25 January. The figure is shy of forecasts, with warm weather conditions in Europe hitting demand. This was especially true in Austria, where Sports Direct's stores felt the impact of a poor skiing season.

Investors are instead focusing on confirmation the retail powerhouse should generate double-digit growth in annual EBITDA to at least £360 million, before employee bonus share scheme costs. Sports Direct is powering ahead with its proven strategy of piling up and selling a broad range of products at competitive prices. These span third-party as well as higher-margin owned brands including Dunlop, Everlast and Slazenger. Indeed, gross profit grew 9.4% to £297.2 million in the quarter, reflecting a shift in the owned brands sales mix towards higher margin products.

Web chart - SPD - Feb 15

In a note entitled 'Let It Snow', broker Jefferies, with a 'buy' rating and 880p target price, argues the retailer could be a an inflection point. 'SPD has been held back in recent months by a combination of very unhelpful weather conditions and the on-going process of cleaning up merchandise in acquired European businesses,' writes Jefferies. 'Ultimately we believe in the potential for SPD to successfully replicate in Europe its retail model of discount positioning on external brands (whilst enriching gross margins via owned brand sales).'

Cantor Fitzgerald's Freddie George downgrades this year's taxable profits estimate from £290 million to £285 million, though his £326 million 2016 estimate remains intact, underpinned by the Rugby World Cup. Sticking with his 'hold' rating and 760p price target, George highlights significant free cashflow, yet believes the retailer 'does not appear to have a clear strategy to reinvest these resources. The focus, in our view, should be on strategic acquisitions rather than on opportunistic investments' – referring to the acquisition of interests in MySale (MYSL:AIM), Debenhams (DEB), Tesco (TSCO) and of fitness gyms – 'developing more broadly the business overseas and growing online sales.'

Issue Date: 19 Feb 2015