Sports Direct International shares fell the most in more than four years after sales growth stagnated, raising concern that the retailer's own brands are losing out to exclusive labels from Nike and Adidas.
Retail sales at the sporting-goods merchant rose just 0.2 per cent to £1.2 billion in the six months to October 25th, the company says. The shares slumped as much as 15 per cent to 567 pence, the steepest drop since August 2011.
Sports Direct is placing greater emphasis on brands that it owns, such as Kangol and Lonsdale, rather than the type of exclusive Nike and Adidas ranges that are proving so popular with customers of competitor JD Sports. Sales at JD Sports are surging, prompting the company to increase profit guidance last week.
"Sports Direct customers overall are unimpressed by the increasing amounts of own-label product," Jonathan Pritchard, an analyst at Peel Hunt, said by email. "We are concerned about the cracks emerging in the business model."
Sports Direct chief executive Dave Forsey said the exclusive branded products that are boosting JD's sales performance are not available at his stores.
At least the focus on own-label product is benefiting profitability. Sports Direct’s retail gross margin widened by 1.1 percentage point to 45.6 per cent. About half the company’s store sales come from its own brands.
Chairman Keith Hellawell said the results should be viewed against the backdrop of "disappointing" summer weather and a hangover from last year's soccer World Cup.
His comments bore similarities to those of a year ago, when the company cited the early elimination of the England soccer team from the tournament and an unseasonably mild autumn as drags on performance.
Concern raised recently over staff treatment in media reports will add to long-standing investor unease about corporate governance at Sports Direct, which is majority-owned by billionaire Mike Ashley. – (Bloomberg)
