FORWARD TOGETHER Sports Direct International plc Annual Report and Accounts 2017 Founded in 1982, Sports Direct International plc As part of this strategy, we anticipate that the core (Sports Direct, Group or the Company) is today the Sports Direct business will move towards becoming UK’s largest sporting goods retailer by revenue, and the “Selfridges” of sport. operates a diversified portfolio of sports, fitness, fashion and lifestyle fascias and brands. The Group provides a full multi-channel retail approach across its fascias in the UK, and We aspire to be a leading sports and lifestyle retailer increasingly across its fascias in continental Europe internationally and to deliver sustainable growth and elsewhere. The Group also wholesales and for our shareholders in the medium to long term by licenses its Group Brands to partners in the UK, offering our customers an unrivalled range of high continental Europe, the Americas, and the Far East. quality leading brands. Each year Sports Direct’s c. 29,000 people work The Group’s strategy is to invest in our people together to serve customers and collaborate with and our key third party brand partners in order to our global wholesale and licensing partners to elevate our retail proposition to attain new levels promote the Group’s Brands. of excellence across our multi-brand, multi-sport offering to customers. Forward Together Sports Direct International plc Annual Report and Accounts 2017 CONTENTS Operational highlights 04 Independent auditor’s report to the members of Sports Direct International plc 93 Brand highlights 18 Consolidated income statement 97 Financial highlights 34 Consolidated statement of Sports Direct at a glance 36 comprehensive income 98 Our impact since 2007 40 Consolidated balance sheet 99 Chairman’s Statement 42 Consolidated cash flow statement 100 Our business 44 Consolidated statement of changes in equity 101 Chief Executive’s report and business review 48 Notes to the Financial Statements 102 Financial review 56 Independent auditor’s report to the members of Corporate social responsibility report 60 Sports Direct International plc 153 Risks and uncertainties relating Company balance sheet 154 to the Group’s business 66 Company statement of changes in equity 155 Viability Statement 71 Notes to the Company Financial Statements 156 The Board 72 Consolidated five year record 159 Directors’ report 73 Company directory 160 Corporate governance report 77 Shareholder information 161 Directors’ remuneration report 86 Directors’ responsibilities statement 92 3 OPERATIONAL HIGHLIGHTS A new generation of stores to showcase the very best brands The elevation of our sports retail proposition is vital to continue to strengthen our relationships with our key third party brand partners, to deliver benefits for our customers, and to drive the Group’s long term profitability. It spans product, stores, online, and marketing, with the critical enabler being the Group’s elevation of its property portfolio to facilitate a new generation of stores offering enhanced levels of excellence. We have continued to invest in rolling out more of our new generation retail destinations, which include one or more of the Group’s Sports Retail, Premium, Lifestyle and Fitness fascias, together on a single site. 4 Sports Direct International plc Annual Report 2017 Oxford Street Approximately 50,000 sq.ft. 5 OPERATIONAL HIGHLIGHTS 6 Sports Direct International plc Annual Report 2017 Dublin Approximately 35,000 sq.ft. 7 OPERATIONAL HIGHLIGHTS Sunderland Approximately 38,000 sq.ft. 8 Sports Direct International plc Annual Report 2017 9 OPERATIONAL HIGHLIGHTS Piccadilly Approximately 35,000 sq.ft. 10 Sports Direct International plc Annual Report 2017 11 OPERATIONAL HIGHLIGHTS 12 Sports Direct International plc Annual Report 2017 Our new Flannels flagship store and premium office facility in Oxford Street in London is due to open in 2018. The above is a computer-generated image of how we envisage it will look. 13 OPERATIONAL HIGHLIGHTS Brand showrooms completed FY17 saw the completion of new showroom suites at our head office, which were individually developed by our brand partners Nike, adidas, Puma and Under Armour. Each showroom is a bespoke brand centre, which ensures our third party brand partners are deeply embedded within the DNA of Sports Direct. 14 Sports Direct International plc Annual Report 2017 Proud of our people We are proud of the people who work at Sports Direct and we will continue to make their welfare a priority. In FY17, our people in the UK elected the Company’s first Workers’ Representative, Alex Balacki, who will attend Board meetings on behalf of the Sports Direct family, which numbers c. 29,000 people. 15 OPERATIONAL HIGHLIGHTS 16 Sports Direct International plc Annual Report 2017 A multi-brand, multi-sport, retail experience We have embarked on a number of UK-wide joint marketing initiatives with our third party brand partners in order to support new product releases over the year. This has seen our product offering extend further towards enhanced levels of excellence as we gain access to more of the ‘best’ products on the market. Highlights in FY17 included the continued Nike CR7 campaign and multiple adidas campaigns, including the Speed of Light boot launch. 17 BRAND HIGHLIGHTS Strengthening our ties with brand partners Our relationship with the adidas group has built on the momentum of FY16 and continued to grow with successful campaigns in football, such as the Speed of Light, Red Limit and Blue Blast boot launches. Working together to expand on football, we also had great campaigns featuring the Neo footwear in the lifestyle category and Cloudfoam footwear in running. Through dedicated teamwork and an improved joint business planning process we have been able to deliver significant sales growth with the adidas brand through FY17. FY17 also saw the continued rollout of adidas’ elevated in store presence with new ‘HomeCourt’ concept shop fits being rolled out in key new generation stores alongside new and improved boot room walls. New generation stores such as Dublin, Sunderland and Solihull have had full shop-fits, which have increased and elevated brand presence in store and given customers a much-improved shopping experience. To maintain this momentum through FY18, adidas is continuing to invest heavily with us around key marketing campaigns to drive sell through at the point of sale, both online and in-store. adidas Blue Blast Campaign • Store window takeover in 575 doors • 415 Boot Room installations • Website front-page takeover • Social media advertising • Print advertising 18 © 2016 adidas AG. 24047_art_adidas_SDi_BlueBlast_100x100_inches_Player.indd 1 12/01/2017 15:17 Sports Direct International plc Annual Report 2017 19 © 2016 adidas AG. 24047_art_adidas_SDi_BlueBlast_100x100_inches_Player.indd 1 12/01/2017 15:17 BRAND HIGHLIGHTS FY17 has been a resounding success story for Nike Nike has continued to invest heavily in the team with joint elevated marketing campaigns starting in dedicated to the Sports Direct business, which November with the CR7 boot launch which included now numbers more than 20, and working together store window takeovers, TV, print and out of home we deliver exceptional Nike brand spaces in key advertising in London, alongside a full digital and categories such as Training, Football, Lifestyle and social media campaign. This was followed up by the Running. Recently we have engaged with Nike on Hypervenom campaign in February 2017 and the the introduction of digital screens in stores such as CR7 Chapter 4 campaign in April 2017. Oxford Street, Piccadilly, Shirebrook, Glasgow and Dublin with a view to an extended rollout through We continue to focus on elevating our retail FY18. environments and the Nike brand presentation within them, to provide our customers with great shopping experiences. 20 Sports Direct International plc Annual Report 2017 Nike CR7 Campaign • TV Advertising • Store window takeover in 593 doors across Europe • 413 Boot Room installations • Website front-page takeover • Out of home advertising in London • Social media advertising • Print advertising 21 BRAND HIGHLIGHTS ARMOUR® BASELAYER ARMOUR® BASELAYER IS THE SLEEK, COMFORTABLE, MOISTURE-WICKING “SECOND SKIN” THAT MAKES ALL ATHLETES BETTER. SDI Window Campaign_50inx80in_4.indd 2 8/12/16 9:46 AM 22 Sports Direct International plc Annual Report 2017 Under Armour is continuing to work with us to The brand will utilise its global athletes such as expand the brand presence in Europe and has Anthony Joshua, Andy Murray and Jordan Spieth, as delivered two successful campaigns with a multi- it continues to grow in Europe and play a major part sport clothing campaign in September 2016, and the in the Sports Direct offering going forward. Anthony Joshua training campaign in March 2017. Anthony Joshua Training Campaign The brand’s presence in-store is continuing to improve with shop-fits in new stores and a • Store window takeover in 638 doors rollout plan to improve existing large format • Website front-page takeover stores throughout FY18. Under Armour will see an increased presence in stores, elevated brand • Social media advertising executions online and an excellent range of products • Print advertising across Training, Running, Football, Golf and Lifestyle. 23 BRAND HIGHLIGHTS Puma remains a key brand partner and FY17 saw Puma continue to invest with the introduction of their new concept shop-fits in key new generation stores. This year we have had a number of successful campaigns which have included key replica launches around the Euro 2016 championships, Usain Bolt leisurewear around the Rio Olympics, and the Puma Tricks football boot campaign in June of this year. FY18 is sure to be a growth year with the exciting Velvet Rope women’s training campaign and the Puma One football campaign. Along with in-store and digital presence Puma have also invested in advertising on TV, Billboards and Digital. 24 Sports Direct International plc Annual Report 2017 25 BRAND HIGHLIGHTS No Fear announced a collaboration with grime artist Skepta.