RPT-UPDATE 2-Sports Direct extends winning run as heads for FTSE 100 index

Wed Sep 11, 2013 10:32am EDT

* Q1 group sales up 18.2 pct to 613.3 mln stg

* Gross profit up 23.2 percent to 260.1 million stg

* Company set to be promoted to FTSE 100 index

By Neil Maidment

LONDON, Sept 11 (Reuters) - Sports Direct, Britain's biggest sporting goods retailer, posted a big rise in sales on Wednesday, as shoppers snapped up its cut-price deals and helped sustain a strong run for the shares that is set to take them into the FTSE 100 index.

The firm, controlled by billionaire Newcastle United soccer club owner Mike Ashley, said trading in the 13 weeks to July 28 had beaten its expectations, with group sales of everything from footwear to soccer shirts and gym kit jumping 18 percent on the same period last year to 613.3 million pounds ($964 million).

Gross profit increased 23.2 percent to 260.1 million pounds, while quarterly sportswear sales rose 14.5 percent. Sales in its premium lifestyle unit, which includes USC, jumped 98.3 percent.

The company, which did not give like-for-like sales figures, benefitted from higher gross margins in the period, its financial first quarter, and the acquisition of fashion retailer Republic in February.

The group, which owns Sports Direct.com and Lillywhites stores as well as famous product brands including Slazenger, Dunlop and Lonsdale, has grown rapidly in Britain during the downturn, thanks partly to the demise of rivals such as JJB Sports, as well as acquisitions and growing online sales.

Sports Direct is set to be promoted to the FTSE 100 on Wednesday after its share price jumped to all-time highs following a 40 percent surge in profit in July.

The shares were up 1.7 percent at 728 pence by 1256 GMT on Wednesday, putting the stock on a prospective price-earnings ratio of over 21, which compares with a median of 16 for other major UK-based retailers, according to Thomson Reuters data.

ZERO HOURS

While the share's rapid ascent has put a smile on investors' faces - the price has more than doubled since its stock market listing in February 2007 - the company's treatment of its staff has created good and bad headlines.

In July it said it was handing shares worth over 100 million pounds to some 2,000 full-time staff, just as it emerged that the majority of its workers did not qualify and are employed under heavily criticised 'zero-hour' contracts, which offer no guaranteed work or pay.

Unite, Britain's biggest union, has demanded talks with Sports Direct after claiming the firm is using zero-hour contracts for its entire 20,000 part-time workforce. The firm has not commented on the issue or confirmed how many staff were employed under such terms.

Almost unheard of in the rest of Europe and the United States, the growth of so-called "zero-hour" contracts which make up one in five jobs created in Britain since late 2008, has helped explain the resilience of the UK employment market in the aftermath of the financial crisis.

An industry survey last month showed around 1 million Britons are in zero-hour jobs, far more than the 250,000 estimated by the country's statistics agency.

Data on Wednesday showed that Britain's unemployment rate dropped in July to its lowest since late last year.

Sports Direct, which has around 400 UK stores, has set its sights on a greater presence across Europe where it operates in 19 countries and expects to move into two or three new territories this financial year.

The firm said it would continue to target underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of 310 million pounds for 2013-14, before a charge for bonus share schemes, as it focuses on integrating recent acquisitions in the UK, Austria and the Baltic region.

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