Sports Direct International(LSE: SPD), the UKs leading sports retailer, isfalling today after the company issued its interim management statement for the 13 weeks ending 27th July.
The company reported that group sales for the period rose 12.2% year on year, rising from 634m as reported a year ago, to 711m. Gross profit increased by 11.8% over the same period from 269m to 301m.
However, despite this good overall performance, divisional results were less impressive. For example, during the period the groupsPremium Lifestyle brand sales decreased 8.8% and gross profit fell 11.6%. Sports Retail sales put in the strongest performance over the period, with sales jumping16.3% to 611m and gross profit rising 11.8% to 301m.
Commenting on the results,Dave Forsey, Chief Executive said:
As we highlighted at our preliminary results in July, recent trading, including the period since 27 July, has been in line with managements expectations with some stronger weeks offset by Englands disappointing World Cup performance. Within Sports Retail we continue to focus on upgrading our store portfolio and integrating recent acquisitions, including Eybl and Sports Experts in Austria.
The group continues to targetunderlyingearnings before interest, taxes, depreciation and amortization(before share scheme costs) of 360m for the current period. Interim results will be reported on the 11th of December.
What to do?
For the most part, todays results from Sports Direct met expectations and theres no reason to panic. Unfortunately, the companys sales did take a hit due to Englands dismal World Cup performance but this is outside of managements control. Whats more, the Sports Direct business appears to be performing well, even without, what would have been, a short-term boost from World Cup success.
Still, double-digit sales growth does come at a price and Sports Directs lofty valuation may put some investors off. In particular, at present levels Sports Direct is trading at a forward P/E of 18.7, although the City is currently expecting earnings per share growth of 23% this year. Earnings growth of 23% puts Sports Directs shareson a PEG ratio of 0.8, indicating growth at a reasonable price. Current City forecasts indicate that the company is trading at a 2016 P/E of 16.3.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
