Sports Direct slides as it warns of currency hit to earnings

Sports Direct International slid on Friday afternoon as the company warned that its full-year 2017 earnings would take a hit from recent currency movements after sterling tanked overnight.

The group said guidance provided in its trading update in September of underlying earnings before interest, taxes, depreciation and amortisation of around £300m was based on a GBP/USD rate of approximately 1.30.

In light of recent downward currency movements, it had 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,” it said.

Sports Direct added that after taking into account the hedging above, if the GBP/USD rate is 1.20 on average for the remainder of full-year 2017, the hit to its FY17 underlying EBITDA expectation would be an additional £20m or so.

Sterling slid as much as 6% to hit its lowest level against the dollar since 1985 in Asian trade, with market participants speculating that it could have been the result of a faulty algorithm or ‘fat finger’ trade, with low liquidity also thrown into the mix. The plunge coincided with comments by French president Francois Hollande, who said the EU should take a tough stance with the UK during exit talks.

At 1515 BST, the shares were down 8.7% to 274.26p.