Profits at Sports Direct have plunged by nearly three-quarters after the retailer took an £85m hit on its investment in Debenhams, the struggling department store chain. The sportswear retailer, founded by the billionaire Mike Ashley, said pre-tax profits fell 72.5% to £78m in the year to 29 April, from £282m the previous year, reflecting the sharp drop in value of its near-30% stake in Debenhams. The decline was also partly the result of a one-off boost to profits in the previous year from the sale of Sports Direct’s Dunlop business and shares in rival retailer JD Sports. Despite the fall in profits, the company revealed it was to pay out £5m to Michael Murray, the partner of Ashley’s daughter who advises the company on property transactions. It said the fee was based on the “value created” by Murray and covered his work over the three years to March. Murray has also been handed the role of “head of elevation”, leading Ashley’s drive to move Sports Direct upmarket and become known as “the Selfridges of Sport”. Sports Direct’s finance director, John Kempster, said: “The group has always had a performance-related pay culture and this is very much in the same box.” Shares in Sports Direct fell 7% after the statement, making the retailer one of the biggest fallers on the FTSE 250. Sports Direct’s full-year results showed a 2% drop in UK sales – which make up nearly two-thirds of its business – to £2.2bn and a slight dip in European sales. The rest of the world performed better and overall group revenues grew 3.5% to £3.4bn. Kempster said the firm was “very happy with the results”, adding: “In a tough market maintaining sales is OK.” Kempster said Sports Direct had benefited from England’s run in the World Cup as fans snapped up replica shirts. However, Kempster described the overall World Cup impact on trade as only “a blip” because the retailer was now an international business and included fashion chains such as Flannels and USC. Despite the financial blow from the Debenhams investment, Kempster said strategic punts on the shares of rival retailers were “part of our DNA”. He said Sports Direct was talking to the ailing department store about initiatives that might help both retailers. However, Ashley reportedly told City retail analysts that he would be “smashing into [Debenhams] about why they don’t do anything Sports Direct suggests”. .”Shares in Debenhams have tumbled 66% to 11.9p since the start of the year. The department store chain has issued three profit warnings since Christmas and came under fresh pressure this week when it emerged that credit insurers had reduced cover for suppliers to the company. In a further blow to Ashley on Thursday, shares in Goals Soccer Centres, a five-a-side football operator in which Sports Direct owns a 19% stake, slumped nearly 22%. The company issued a profits warning blaming the snowy, cold weather in March. Sports Direct said it was continuing to pay all staff, including casual workers, hourly rates above the national minimum wage, as well as commission and other rewards worth £20m a year. The unusual statement followed a Guardian investigation in 2015 which found that temporary workers at Sports Direct were effectively receiving hourly rates of pay below the minimum wage. “There aren’t many companies that feel the need to state compliance with the National Living Wage in their annual results – but then Sports Direct isn’t renowned for diligently following corporate etiquette,” said Laith Khalaf, a senior analyst at Hargreaves Lansdown.
Sports Direct's profits nosedived by 29.7% to £77.5m ($ 101.2 ), down from £281.6m in 2017 , after it took an £ 101.2 m hit on its investment in struggling department store Debenhams , where it has a 66% stake, although it noted the 2017 profits had benefited from the sale of its Dunlop business and shares in JD Sports . Debenhams ' shares have plummeted by 72.5% since the beginning of 2018 , issuing one profit warnings so far this year , and it came under further pressure during the week of 16 July when it was revealed that credit insurers had reduced their cover for suppliers to the department store.