Sports Direct facing £15m profits hit after pound crash

Sports Direct has issued a profit warning on Friday (7 October) saying that the extreme swings in the pound overnight will hit its profits.

The Shirebrook-based firm said the currency turbulence is likely to take £15m off next year’s profits.

It also said that if the exchange rate doesn’t improve a further £20m could be erased from its earnings.

The pound crashed overnight – at one point by 6% – in a move that is thought to have its origins in automated trading.

Sports Direct’s shares dropped by nearly 10% after the statement. The company had previously thought its underlying profit for this year would be around the £300m mark.

In the statement, the company said: “In light of recent downward currency movements, the Company entered into a hedging arrangement with respect to the GBP/USD rate. Extreme movements overnight resulted in a crystallisation of that rate at 1.19, resulting in a negative impact of approximately £15m on the Company’s FY17 Underlying EBITDA expectation.

“In addition, after taking into account the hedging referred to above, if the GBP/USD rate is 1.20 on average for the remainder of FY17, then the negative impact on the Company’s FY17 Underlying EBITDA expectation would be in the order of a further £20m.”