Staff bonus scheme extended as it drives Sports Direct profits up 40%

Sports Direct is to extend its staff bonus scheme for the next two years after the incentive helped the chain deliver a 40 per cent jump in half-year profits.

The pre-Christmas boost for hundreds of workers came as the group said the recent cold snap had been a "net positive" as winter products flew off its shelves.

Eligible employees will receive a potential bonus of up to one year's salary, weighted 25 per cent in shares in the financial year ending 2012 and 75 per cent in shares in 2013. The retailer must hit underlying earnings targets of 215 million and 250m in each year respectively.

Some 2,000 staff at Sports Direct, which has more than 350 stores in the UK, will be eligible for the staff bonus scheme.

The company - controlled by Mike Ashley, owner of Newcastle FC - said it was confident of hitting this year's underlying earnings target of 205m and triggering this year's bonus awards. Non-executive chairman Keith Hellawell said there was "no doubt" the scheme helped the group record 100.7m in pre-tax profits in the six months to 24 October and an 8 per cent rise in revenues to 819.9m. No interim dividend was declared.

The figures come in stark contrast to struggling rival JJB Sports, which issued a profit warning earlier this month, blaming severe winter weather as a contributory factor.

Sports Direct chief executive Dave Forsey said: "With us you get a lot of product which is very appropriate for this type of weather and we would benefit from having a lot of winter coats, footwear, gloves, hats and scarves."

He said the firm, which also trades under the Lillywhites and Gilesports banners and has stores in Ireland, Belgium, Holland and Slovenia, had sold 30,000 sledges so far this winter. The group reported its strongest ever trading day when England played the United States during the World Cup.

The run-up to the tournament boosted sales but the impact dwindled as England's performance failed to live up to expectations, the company added.

Sports Direct is rolling out a strategy of store improvements, including new merchandising techniques, and openings. It is still on target to open between ten and 15 outlets this year.

Forsey gave a cautious outlook, telling investors: "We anticipate the general retail environment in the first few months of 2011 to be tough.However, trading since the end of October has continued to be in line with management expectations."

He said a step-up in the group's television advertising this month was not designed to hit JJB while it was struggling.

"We concentrate on our own business," he said, noting the campaign was designed "to reinforce the value that we offer and the range of products that we offer in these times".

Matthew McEachran, an analyst at Singer Capital, said the continuation of the bonus scheme signalled a further boost to trading prospects. "All divisions are progressing well and the combination of sharp value and rapidly improving store merchandising techniques is being well received by consumers," he noted.

Sports Direct floated in 2007. Ashley owns 71 per cent of the equity.