Sports Direct 'confident' it will outstrip profit targets

The Christmas trading statement from Britain's biggest sports retailer was relatively upbeat, although the group admits trading conditions in the UK are "worsening" as consumers face higher household bills.

Newcastle United owner Ashley has faced a storm of protest since floating Sports Direct last March, with the shares losing two-thirds of their value.

The City is increasingly concerned that Ashley is more interested in events on Tyneside than in overseeing his retail empire. Today's statement suggests the shops may have fared slightly better than the team of late.

Sales in the 11 weeks to 13 January were £280 million, leaving the group "confident" it will beat profit expectations of £138 million for 2008.

But Nick Bubb of Pali International remained sceptical, saying: "It is not a profit warning on the face of it, but the 45% gross margin for the period is below expectations and the bar has been set very low in terms of beating profits. The trading statement still looks disappointing and the valuation of the group still looks relatively demanding."

Pali says the shares remain a sell with a target of 79p. They today slipped 1p to 97¼p, against a float price of 300p.

Ashley is still looking for a chairman following the resignation of David Richardson in May. Ashley is deputy chairman but is clearly in no hurry to address holes in the executive management structure.

Sports Direct, which trades as Sports World, also owns Lillywhites and leisure brands Dunlop, Donnay and Slazenger. Ashley, who pocketed £929 million from the float, has since bought back some of the stock to take his holding to almost 70%.

The sparseness of today's statement is likely to lead to fresh complaints from analysts about lack of information. The group has never given like-for-like sales figures - which are standard in the retail industry - an omission the City dislikes. Ashley blames Merrill Lynch for not having made it clear to investors before the flotation that like-for-likes would not be issued because he does not regard them as a meaningful measure of performance.

Merrill Lynch, which led the float, admitted in December that it found it difficult to put a value on the business, and that it had almost no relationship with top management.

The environment for all clothing retailers has been tough. JJB Sports recently issued its second profit warning in less than six months. Next, French Connection and Blacks Leisure have all been pessimistic about the coming year.

Sports Direct promises to give more detailed information about how it is doing on 9 March.

Chief executive Dave Forsey said: "We expect the retail trading environment in the UK to become increasingly difficult over the next six months."