Newcastle United owner Mike Ashley's Sports Direct warns of 'significant impact' of pound's collapse as profits dip

Core earnings at the retailer fell 0.5% to £381.4million and the firm, run by billionaire tycoon Mike Ashley, said the pound's plunge against the dollar would take a toll on margins this year.

On a underlying pre-tax basis, profits fell 8.4% to £275.2million. Sales were up 2.5% to £2.9billion.

The company said: "Since the EU vote we expect the current political uncertainty, and potential weakness in the UK's short to medium term economic outlook, is likely to act as a continuing drag on consumer confidence.

"When combined with the structural difficulties for UK retailers, including high street footfall, and our exposure to the weakness of the pound against the US dollar (as announced on 24 June 2016), these factors make the current outlook for full year 2017 somewhat uncertain and therefore hard to predict.

"We expect gross margin to be impacted significantly by negative movements in exchange rates in FY17 and beyond, given the recent movements in the US dollar compared with the pound."

Unlike many other businesses, Sports Direct is not hedged against currency movements, meaning the weak pound will impact its product buying power.

Sports Direct also said Mr Ashley, who is also the owner of football club Newcastle United, has "no current intention of taking the company private".

He was grilled by MPs last month over the retailer's working practices, and the firm said it has "set in motion a review of the specific concerns".

Unite's assistant general secretary Steve Turner said: "It is clear that shameful work practices have not only battered Sports Direct's reputation, but are seriously harming its profits and share price.

"The Victorian employment practices of Transline and The Best Connection at Sports Direct's warehouse would shame the pages of a Dickens novel and should have no place in 21st century Britain.

"Unless Sports Direct severs ties with these employment agencies and moves to put workers on permanent contracts, then it risks further damage to its beleaguered reputation and profits.

"We urge the Government to take action too and protect the good name of British business by backing Louise Haigh MP's private members' bill to extend the remit of the Gangmasters Licensing Authority to cover all sectors in the economy."