Sports Direct shares tank on profit warning

8th Jan 2016 11:48

(ShareCast News) - Sports Direct International tumbled after saying it is no longer confident of meeting its adjusted underlying core earnings target for the full year due to deteriorating trading conditions on the high street and unseasonal weather over Christmas.The sports clothing retailer, which came under scrutiny recently after a damning Guardian report about the way it treats its warehouse staff, said it is now unlikely to meet its adjusted underlying earnings before interest, taxes, depreciation and amortisation target of £420m for the full year."In light of these factors, and in anticipation of similar trading conditions between now and the end of April, management's current expectation for the full year is for adjusted underlying EBITDA (before share scheme costs) of between £380m and £420m," it said.Sports Direct shares tanked in December after the Guardian reported that some of the group's temporary workers were getting paid less than the minimum wage.An investigation by the paper revealed that many of the company's warehouse staff were being paid an effective rate of about £6.50 an hour against the statutory rate of £6.70.Sports Direct hit back at the Guardian claims, saying criticism of the way it treats its staff was "unfounded" and on 31 December, the company said that as of this year, its directly employed UK staff and directly engaged casual workers would be paid above the National Minimum Wage.Jefferies, which is reviewing its 'buy' rating on the stock, said: "This feels like a clearing of decks exercise, but we need to shed more light on some key issues before being able to look at a potential new valuation of 2016 P/E of under 11x and around 7% yield (both calendar at 467p), and a resumption of growth from 16/17 with any degree of confidence."It pointed out that recent trading updates by fashion peers have confirmed the ongoing pressure in demand in recent weeks, both in the UK and in Europe.The lack of snow in the Alps certainly represents an added challenge for some European operations, it said. At 1540 GMT, shares were down 14.8% to 436.30p.