Sports Direct International PLC (LON:SPD) boss Mike Ashley once said he wants to turn the group into the “Selfridges of Sport” but a tough UK retail market and a weaker pound have made this goal harder to reach.
Despite the struggles facing the high street, the sportswear retailer is expected to unveil growth in profits and revenues in its full year results on Thursday.
Analysts have forecast a 7.1% increase in earnings (EBTIDA) to £292.1mln and a 3.9% increase in revenues to £3.37bn for the year.
George Salmon, equity analyst at Hargreaves Lansdown, said the results will be a “very important set of numbers for Sports Direct”.
“We’ve not had an update on trading since half year results in December,” he pointed out.
“Back then the group’s strategy to elevate its retail offering, seemed to be showing some early signs of success, with growth in underlying profits despite a sluggish UK performance. However, recent conditions on the UK high street have been dire, to put it mildly.”
He said the recent bout of nice weather and England’s good run in the World Cup – up to the semi-finals anyway – could have boosted trading. However, the plan to become the “Selfridges of Sport” still needs to deliver results, Salmon added.
The Hargreaves analyst also noted that the last six months has also seen changes in the stakes Sports Direct owns in other businesses, with its holding in department stores group Debenhams PLC (LON:DEB) increased to 29.7%, while its stake in US shoe retailer Finish Line has been sold.
“With Debenhams having had a very tough time this year, watch out for commentary on the strategic investment portfolio,” he said.
SSE shareholders vote on Npower merger
Elsewhere, shareholders will vote on whether to approve SSE plc’s (LON:SSE) plan to spin off its retail energy supply business at the company’s annual general meeting on Thursday.
SSE and Npower, owned by Germany’s Innogy, want to merge their household energy supply businesses to create an independent company.
The deal was announced last year in the face of tough competition from smaller energy suppliers.
SSE, which will remain in energy networks and power generation after splitting off the supply business, has said it believes the new company will be more focused and deliver cost synergies.
Hargreaves Lansdown's Salmon said he expects shareholders to give the proposal the green light at the AGM.
“The group’s confident it can realise £175mln of synergies in the move, but as ever with mergers, there’s no guarantee the ‘on paper’ savings make it to reality,” he said.
The company will also release a first quarter trading statement with the focus on whether the company was able to recover after posting a near 39% drop in 2018 profits and losing 430,000 customer accounts.
Government price caps and customers switching to cheaper alternatives have been the biggest challenges for the group, while the milder weather since the end of March will also likely result in reduced energy demand.
UK retail sales data
In economic data, the Office for National Statics releases figures on UK retail sales for June.
Following a relatively poor set of figures from the UK high street in the first quarter, retail sales figures during April and May were much improved as the warm weather helped consumer demand.
Economists expect retail sales, excluding auto fuel, rose 3.7% year-on-year in June after a 4.4% increase in May.
The Share Centre analyst said: “There are expectations hope that the hot June weather and the so far successful performance of our football team that has given a big boost to spending on summer clothing ranges, barbeques, beers, and England football paraphernalia.
“More importantly a good figure would help cement the view that the economy as a whole is experiencing a modest bounce back after the weak first quarter.”
Significant announcements due:
Finals: Sports Direct PLC (LON:SPD), Versarien PLC (LON:VRS)
Interims: Unilever plc (LON:ULVR), Moneysupermarket PLC (LON:MONY), Nichols plc (LON:NICL)
Trading updates: Anglo American PLC (LON:AAL), SSE plc (LON:SSE), Speedy Hire Plc (Q1) (LON:SDY), Euromoney Institutional Investor PLC (LON:ERM)
AGMs: Royal Mail Group PLC (LON:RMG), Babcock International PLC (LON:BAB), Electrocomponents PLC (LON:ECM), Halma PLC (LON:HLMA), AO World PLC (LON:AO.), Mothercare plc (LON:MTC)
Ex-dividends: None
Economic data: UK retail sales; US weekly jobless claims; US Philadelphia Fed index