Sports Direct's margin growth helps offset Austrian problems

LONDON, United Kingdom - Retailer Sports Direct reported a rise in its third-quarter gross profits on Thursday, as stronger profit margins helped offset weaker than expected sales growth caused by a poor winter season for its Austrian business.

Britain's biggest seller of sporting goods, controlled by founder and Newcastle United soccer club owner Mike Ashley, said gross profit for the 13 weeks to Jan. 25 increased 7.6 percent to 346.9 million pounds ($536 million).

The rise was helped by an increase in the gross margin of 2.8 percentage points at its core retail sports business, which has over 420 UK stores and another 270 in continental Europe, as the company tightens its stock control, reduces markdowns and improves premium ranges.

Chief Executive Dave Forsey said management was "very confident" of achieving at least its full-year target for underlying earnings before interest, tax, depreciation and amortisation of 360 million pounds, before a charge for bonus share schemes.

Sports Direct's shares were up nearly 2 percent at 699 pence by 0857 GMT, valuing the business at around 4 billion pounds.

In the third quarter total group sales, which include contributions from the company's fashion chains and brands arm, were up 2.6 percent.

That was ahead of a 1.5 percent rise in its second quarter but below a 4.2 percent rise forecast by analysts at Goldman Sachs and a first-half rise of 6.5 percent.

The company, whose broad ranges and cheap prices have made it the UK's dominant player, said group sales had been held back by a weak European winter season for its Austrian arm, which it bought in June 2013 as part of an ambitious expansion into mainland Europe.

While analysts have awaited more acquisitions overseas, all the recent news headlines about the firm have been about its home business.

Led by the secretive Ashley, the firm has taken financial bets on the performance of Britain's biggest retailer Tesco and department store chain Debenhams, and has been called before a Scottish parliamentary committee to explain its treatment of workers during the administration of a part of its USC fashion chain business.

This week the company confirmed the departure of its acquisitions strategy director Jeff Blue. Meanwhile Ashley, who recently cut his stake in Sports Direct, has become embroiled in a power struggle at Scottish soccer club Rangers.

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