Sports Direct sees UK sales fall amid focus on smarter flagship stores

Sports Direct has reported a fall in sales in its core UK retail business as it pushes through a shake-up aimed at taking it in a new upmarket direction.

Boss Mike Ashley said the strategy was delivering "spectacular trading performance" at its flagship stores - and that it planned to open 10 to 20 more of these next year.

But other sites have been closing and online promotional activity has been scaled back, contributing to UK sports retail sales in store and online falling 1.4% to £1.12bn in the six months to 29 October.

Shares (Berlin: DI6.BE - news) were down 9% in mid-morning trading but recovered most of those losses to close the day 2.2% lower.

The business also took a hit to its profit margin as it made provision for extra stock and counted the cost of the weak pound - which has driven up the price of imports.

Growth in overseas sales and premium lifestyle brands such as Flannels helped overall revenues climb 5% to £1.71bn.

Reported pre-tax profits for the half year were down 67% to £46m though this included the effect of one-off accounting adjustments and asset sales in the same period in 2016.

On an underlying basis, profits rose 23% to £88m.

Mr Ashley, the colourful tycoon who owns the majority of the business and is also its chief executive, has previously described his ambition to turn Sports Direct into "the Selfridges of sports retailing".

The plans involve opening smarter-looking stores in city centres showcasing premium products from the likes of Nike (Sao Paolo: NIKE34.SA - news) and Adidas (IOB: 0OLD.IL - news) and better competing with rival JD Sports.

Delivering the latest results, Mr Ashley said: "Our high street elevation strategy is currently delivering spectacular trading performance within our flagship stores.

"We intend to open between 10 and 20 new flagship stores next year."

Openings will take place in locations such as Leicester, Watford and Thurrock, Mr Ashley added.

He said the business was on course to deliver its target for full-year underlying earnings growth.

Sports Direct has come under fire over alleged "Victorian" working conditions at its Shirebrook warehouse, prompting it to implement a series of workplace and pay reforms.

Mr Ashley said in the latest update that he was confident that improvements made over the past 18 months "have made a positive difference" and that it would continue to monitor working practices "to avoid complacency".

The company appointed Alex Balacki, a workers' representative elected by staff, to the board earlier this year and it said his inaugural period would be extended by a further year, to be followed by a new staff election.

It said it had "accepted a number of recommendations" from Mr Balacki and would provide an update on these "in due course".

The half-year results come a day after independent shareholders rejected a proposal by Mr Ashley to pay his brother £11m.

Sports Direct had said John Ashley, who holds a senior IT position at the company, had missed out on a series of benefits that would have been due to him for fear they might be seen as inappropriate.

Mike Ashley, who owns Premier League side Newcastle United, has also been in the headlines recently over his attempt to sell the club.