Pound’s Slump Prompts Sports Direct to Lower Profit Guidanceby
Full-year profit could decline by as much as 35 million pounds
U.K. retailer’s shares fall as much as 13% in London trading
Sports Direct International Plc found itself exposed to the pound’s sudden drop as losses on the U.K. sporting-goods retailer’s currency hedge forced it to scrap the profit forecast issued just a month ago. The shares fell as much as 13 percent.
“Extreme movements overnight” in the pound-dollar rate mean the company’s underlying earnings before interest, tax, depreciation and amortization will be cut by about 15 million pounds ($18.7 million), the Mansfield, England-based company said in a statement Friday. Should the rate remain at $1.20 on average for the rest of the fiscal year, adjusted profit will be hurt by another 20 million pounds, Sports Direct said.
The company entered the hedging arrangement only recently, as it said July 7 that it wasn’t insulated against declines in the pound. The retailer, which had seen adjusted profit of about 300 million pounds this fiscal year through April, said Sept. 7 that it was reviewing its hedging policy.
The reduced profit forecast is the visible first aftershock among U.K. companies of the plunge in the currency in Friday’s Asian trading. The pound sank the most since the Brexit vote, with traders saying computer-initiated sell orders exacerbated the slump. The reduced guidance comes just two weeks after founder Mike Ashley took the helm at the troubled retailer, which is reeling from accusations of slack governance and unfair labor practices.
The shares were down 11 percent to 268.50 pence at 4:29 p.m. in London, and have lost more than half their value this year.