Sports Direct in warning over future performance

The group said that, fuelled by a strong first quarter, which included the World Cup, it expected first-half results to be "significantly above" the same period last year. However, Dave Forsey, group chief executive, warned that despite the strong performance across all divisions "we believe the early part of 2011 will be extremely challenging for all retailers in the UK". As a result, Britain's biggest sports retailer is sticking with its current target for underlying earnings before interest, tax, depreciation and amortisation of 205 million before the 10m charge for the company's bonus share scheme. One analyst, who preferred to remain anonymous, suggested the firm could now be on track to boost profits by up to 30 per cent for the six months to 24 October. Sports Direct - whose boss also owns Newcastle United football club - said the boost from the World Cup in the first quarter had continued as group sales were up 5.4 per cent to 295m in the nine weeks to 26 September. Retail profits lifted 6.1 per cent to 105m. The sales figure is lower than the 8.8 per cent rise seen in the first quarter but in line with expectations, Matthew McEachran, retail analyst at Singer Capital Markets, noted. Sports Direct said it believed its staff bonus share scheme had played a key role in delivering the strong first-half performance. More than 2,000 staff were given a boost in July when the retailer said annual earnings of 160.4m were enough to trigger the first stage of its bonus scheme. All permanent staff with at least two years service landed shares worth 25 per cent of salary, payable in two years. Forsey said the company planned a new scheme that covered the next two financial years, including 2012-13 when the London Olympics and Euro 2012 football tournament should boost trade. The Nottinghamshire-based company has more than 350 stores in the UK, the majority of which trade under the Sports Direct.com fascia with others branded Lillywhites, McGurks, Exsports, Gilesports and Hargreaves and Field & Trek. Investec Securities said its full-year earnings forecast remained at 185m, below the company's guidance of 195m. Analyst Katharine Wynne added: "The company is rightly very cautious about the fourth quarter, when the combination of VAT increases, new season price increases and lack of sports spending catalysts may all offset the benefit of soft comparatives." The company and rival JJB revealed on Tuesday that they will not face charges from the Serious Fraud Office (SFO) following an investigation into allegations of cartel activity.The SFO is still investigating individuals in the case while an inquiry by the Office of Fair Trading into alleged anti-competitive conduct in the sports goods retail sector is ongoing. Sports Direct's shares slipped 2.4 per cent to 143.9p. The stock has outperformed the UK retail index by about 50 per cent this year as the market priced in the likely tailwind from the World Cup, traditionally a boost for sports retailers.