Goldman ups Sports Direct to 'neutral'

It said the closure of loss-making European stores, UK space opening, the anniversary of elevated depreciation/one-off legal charges/onerous leases/dispute settlement, and a rapid share buyback programme should drive FY18 pre-tax profit of £110m, flat on the year, and EPS of 14.2p EPS, up 10%.

"In the context of a return to EBITDA progress from here, we believe an adjusted free cash flow yield in line with peers (2018E circa 5%) is credible, driving a 350p 12-month price target and a neutral rating from sell," it said.

The bank pointed out that since being added to the Sell List on 26 June, 2016, the shares are up 4% versus the FTSE World Europe up 31%.

Key risks to Goldman's view on the upside include better-than-expected like-for-like trends, opex control and/or an ability to offset the current input cost pressures.

On the downside, it highlighted a market share loss to Amazon, for example, third party brands direct to consumer channel expansion, and a weaker UK consumer pre-Brexit.

At 1250 BST, the shares were up 1% to 356.57p.