Strong sales at Sports Direct made the sports clothing and equipment retailer confident enough to raise earnings targets and increase the size of a related share payout to its founder, Mike Ashley.
Mr Ashley, executive deputy chairman of the chain, could receive 8m shares if Sports Direct achieves an underlying earnings target of £340m before interest, tax, depreciation and amortisation by 2015.
Earlier this year Sports Direct confirmed it would reach a full-year “super-stretch” underlying ebitda target of £225m, putting Mr Ashley in line to receive 6m shares. Mr Ashley is the majority shareholder in Sports Direct with a stake of 72 per cent.
He will only receive the 8m shares, worth £22.8m at the closing price on Tuesday, if the group also meets a series of raised interim earnings goals set at £270m and £290m in 2013 and 2014 respectively.
Sports Direct must also have a net debt/ebitda ratio of 1.5 times or less by 2015. The proposal to grant Mr Ashley the additional shares, which will only vest in 2018, is subject to a shareholder vote later this year.
The gloomy economic outlook has failed to dent revenue for the chain, which reported better-than-expected sales in the nine weeks to March 25.
Group sales rose 13.2 per cent to £267.6m in the period. Gross profit rose 13.5 per cent to £99.8m.
Sales in the group’s core retail division rose 16.1 per cent to £232.6m. Gross profit was £85.4m, a 15.1 per cent rise.
Shares in Sports Direct rose 2.46 per cent in early-morning London trading to 292p, putting the sports retailer closer to breaking through its original float price.
Having listed at 300p in 2007 the shares fell as low as 30p within two years after the company missed profit targets and lost the support of investors, but have since recovered as earnings and sales rose.
Dave Forsey, chief executive, said growth in March and February had gone beyond management’s expectations and he remained “positive” about the group’s outlook.
Like other sports retailers, the owner of the Slazenger and Lonsdale brands is hoping that a calendar of exceptional events taking place in the UK this summer, including the London Olympics and the Queen’s diamond jubilee, will provide an extra fillip to sales.
The group will report preliminary full-year results on July 19.