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Sports Direct Warns Shareholders Of Tough Times Ahead Following Brexit

Sports Direct ended a "tough" '16 with a warning that trading "was not going to get any easier next year after a slump in first-half profit, sparking another fall in its shares," according to Paul Sandle of REUTERS. The sportswear chain founded by League Championship side Newcastle United Owner Mike Ashley was "badly caught out by the fall in the pound which followed Britain's vote to leave the European Union in June as it pays for its own-brand stock from Asia in dollars." Sports Direct said on Thursday that this had a "significant impact" and its underlying profit before tax fell 57% to £71.6M ($90M) in the 26 weeks to Oct. 23. Group revenue increased by 4.2% on a currency-neutral basis. The period "coincided with a period of intense political and public scrutiny of the retailer, which is still battling criticism of its working practices and treatment of workers." Ashley, who owns 56% of the company and took over as CEO after Dave Forsey resigned in September, acknowledged the last six months had "been tough for our people and performance." The group said that full-year '17 underlying core earnings "would be around the bottom of its guidance in October" of a range between £265M ($334M) and £285M ($359M) as it "saw no let up in the difficult conditions facing it in the medium term" (REUTERS, 12/8).

ALL IN THE FAMILY: In London, Ashley Armstrong reported Sports Direct, which has been "under fire for the past year for the poor treatment of its warehouse staff and a lack of corporate governance," has divided views on its progress after sealing another deal with a member of Ashley’s family and spending $51.1M on a new corporate plane. Despite a City watchdog investigation into an arrangement between Sports Direct and an overseas distributor owned by the tycoon’s brother, John Ashley, the company has "revealed it has entered into an agreement with a beauty company" owned by Ashley’s 19-year-old daughter Matilda. The company said that Matilda’s business, Double Take, will "license the exclusive rights to a beauty brand called Sports FX" with royalties and fees paid in '19. The business also uses Mike Ashley's eldest daughter's boyfriend Michael Murray to "provide property services," including overseeing the recent £108M ($136M) purchase of an Oxford Street property for the group's upmarket Flannels chain. The company also announced it "would pause" its $90M share buyback (TELEGRAPH, 12/8).

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