Sports Direct warns again of lower profits

By Kate Holton and James Davey

LONDON (Reuters) - Sports Direct, Britain's biggest sportswear retailer, was forced to officially reduce its profit forecast on Wednesday, a day after its controversial founder Mike Ashley effectively gave a profit warning in a newspaper interview.

The last six months has seen a dramatic change in fortunes for a firm which has a presence on most British shopping streets, offering low priced sports goods through its 450 stores.

Ashley, who owns 55 percent of the company, has come under renewed fire in recent months from media, politicians and investors over the firm's employment practices and with trading deteriorating its shares have been in free-fall.

Having fallen 10 percent on Tuesday, they dropped a further 2.8 percent on Wednesday and are down 42 percent on a year ago. With a market value which has dropped to just over 2.2 billion pounds the company was relegated from Britain's FTSE-100 index of blue chip companies earlier this month.

Flouting the strict rules on how companies disclose financial guidance, Ashley, told the Times newspaper on Tuesday: “We are in trouble, we are not trading very well. We can’t make the same profit we made last year."

In the interview Ashley said "media intrusion" was hurting Sports Direct's results.

In a one-line "clarification" statement to the Stock Exchanged released 24 hours later, Sports Direct said it now expected its full-year 2015-2016 underlying core earnings to come in "at or around the bottom of the range" which it announced in January, when it had also cut its forecast.

Veteran retail analyst Nick Bubb said that even more extraordinary than Ashley's admission that Sports Direct was struggling was his apparent belief that all its problems were caused by the media and lawmakers, rather than poor moves on acquisitions, the strength of rival JD Sports and consumer fatigue with its cluttered stores.

RBC analyst Richard Chamberlain said that Sports Direct is also amongst the most exposed British retailers to strong dollar headwinds and rising labour costs as a result of Britain's new national living wage.

Ashley, who also owns Newcastle United football club, has also been embroiled in a row with politicians after a newspaper investigation alleged some Sports Direct staff were effectively earning less than the minimum wage.

The company has rejected criticism around its working practices and reviewed conditions.

Ashley has been called to appear before a parliamentary committee in June to answer questions over how the company is run but has so far refused to attend. He has instead invited lawmakers to visit his warehouse in Shirebook, central England, which they have refused to do.

If Sports Direct's core earnings were to come in at the bottom of the 380 million pounds to 420 million pound range forecast in January, that would represent a small fall from the previous year when the firm made 383 million pounds.

(Editing by Greg Mahlich)