Business

Sports Direct hit by slide in pound

Sports Direct logo Image copyright Getty Images

Sports Direct has warned that the extreme swings in the pound overnight will hit its profits.

In a statement, the company said the move will hit next year's profit by about £15m.

In addition, if the pound averages $1.20 over the financial year, it may lose another £20m.

Overnight on Friday the pound temporarily plunged by 6%, in a flash crash that is thought to have been triggered by automated trading.

Shares in Sports Direct closed down 9% on Friday.

The company had expected to report underlying profit of £300m based on the pound trading at $1.30 against the dollar.

However, the retailer said that "extreme movements overnight" would result "in a negative impact of approximately £15m" on its results for the current financial year.

The swings overnight hit the company's hedging arrangements, which are designed to protect a business against volatile currency prices.

Tumultuous year

It also sustained a large loss in its last financial year because of currency movements.

In that case, because of a fall in the value of the pound against the euro, it took a £65m hit.

As a result, Sports Direct reported underlying earnings of £381.4m for the year to 24 April against expectations of £420m, resulting in staff missing out on a bonus.

It has been a tumultuous year for Sports Direct which has been criticised for working conditions at its Shirebrook distribution centre. Most recently, its chief executive Dave Forsey stepped down and was replaced by Mike Ashley, the founder and majority shareholder of the retail chain.

The company has an acting finance director after its former financial chief Bob Mellors stepped down in December 2013 after a decade with the business.

Matt Pearson was appointed as interim chief financial officer on 2 June 2015.

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