Financial Trading Blog
Stock of the day 01/07/2016 – Sports Direct International PLC
2016 immediately got off to an awful start of Sports Direct, the company issuing a profit warning a mere 8 days into the year. Poor Christmas sales (thanks to falling high street footfall) led the company to slash its profit outlook to £380 million to £420 million, sending the stock to a 33 month low of £3.82.
Having crept back to £4.37 towards the end of March the company was then dealt another blow as Mike Ashley claimed the retailer was ‘not trading very well’. Though not an official profit warning, Ashley’s comments were taken as such, sending Sports Direct to a fresh 2016 low of £3.45.
(Source: IT-Finance.com 01/07/2016)
Since then the company has struggled to gain any momentum whatsoever, in part due to the image issues that come with having someone like Ashley at the helm. By the end of April the stock had climbed back above £4, only to be sent lower by the collapse of BHS (something Ashley managed to find himself embroiled in, claiming Philip Green prevented him from rescuing the company). Sports Direct’s misery continued throughout May and into June, as Ashley was grilled by MPs about the working standards in his warehouses, pushing the stock to £3.33.
In the run-in to the referendum things then seemed to be picking up for the bargain retailer, which hit £3.85 on the eve of the results. However as the votes were counted, and Vote Leave prevailed, Sports Direct’s shares began to plummet, at one point hitting a near 4 and a half year nadir of £2.50 before settling at £3.20. Sports Direct was actually one of the first companies post-Brexit to come out and state the impact of Britain leaving the EU, warning that increased volatility and a weak pound would ‘impact purchases for which the company is currently not hedged for the FY 2017 period and beyond’. Sports Direct International sits at a current trading price of £3.08 (IT-Finance.com, 01/07/2016).
In terms of the company’s full year update, investors will be focused on a) the state of its underlying profits (namely whether it falls at the upper of lower end of 380 million to £420 million) and b) a more comprehensive outline of the Brexit-impact.
Sports Direct International PLC has a consensus rating of ‘Hold’ with an average target price of £8.28.
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