Sports Direct International expects to reduce its debt faster than expected as it continues to register strong sales growth in the U.K. The company confirmed its target of an underlying gross profit (Ebitda) of £205 million (€241.7m-$333.7m) for the full year ending in April 2011. Ebitda is expected to be trimmed by a charge of about £10 million (€11.8m-$16.3m) for the bonus share scheme. Some analysts believe that the group could beat its own forecast.
The U.K.'s largest sports retailer booked a 12.1 percent rise in sales to £416 million (€490.5m-$677.1m) in the third quarter running from Oct. 25 to Feb. 16, and gross profit increased by 8.4 percent to £167 million (€196.9m-$271.8m). Retail sales in the 13-week period grew by 13.8 percent to £371 million (€437.4m-$603.9m) and retail gross profit was up by 9.6 percent to £149 million (€175.7m-$242.5m). The Brands division increased revenues by 2.2 percent to £46 million (€54.2m-$74.9m) and gross profit was up by 5.9 percent to £18 million (€21.2m-$29.3m).
During this period, the company opened five core and three temporary stores in the U.K. In the meantime, it closed one core, two temporary and four non-core stores in the country. It converted three stores in Portugal following the recent acquisition of a 51 percent stake in Mega Sport, the third-largest sports retailer in Portugal. Mega Sport has 15 stores, which are all scheduled to be renamed Sports Direct by April. The group also opened one new store in Slovenia.
The chief executive, Dave Forsey, said that the group's underlying performance has been strong since the end of January, especially within the U.K. retail division. In the last quarter, the company will seek to support margins and/or step up marketing efforts. Net debt is expected to decline to 0.5-1.0 times the group's underlying Ebitda at the end of the fiscal year in April from 1.2 times in the first half ending on Oct. 24. When the company released its interim result on Dec. 16, the forecast was for a debt ratio of 1.0-1.5 times Ebitda in April 2011.
