Can Sports Direct’s earnings get its share price back on track?

The kit and clothing supplier’s shares have lost their way somewhat, yet with earnings pending it could be a perfect time to resume its bullish ways.

Sports Direct logo
Source: Bloomberg

With the impending release of Sports Direct’s full-year earnings on July 16, it’s worth taking a look at what has been one of the biggest success stories in the retail sector in recent years. From a purely financial standpoint, the firm has brought about consistent and reliable growth across just about every metric — from earnings, revenue and cost to assets and market share.

Quite simply, you would be hard pressed to buy a sports item on the high street that has not come from the firm, such is the monopolisation of the UK sector of late. The ability to change price expectations has also had a similar effect to that seen with the recent emergence of Uber. People simply feel like they are being ripped off by using any other firm, because the cost savings at Sports Direct far outweigh the perceived difference in terms of quality.

However, the share price has failed to reflect the market expectation that we’ll see yet another improved showing for 2015. Unlike years gone by, the past 12 months has seen the price largely flatline, gradually moving lower from the April 2014 high of £9.20.

That said, there are signs that we could be about to resume the long-term bull trend on Sports Direct and given the consistent fundamental picture, the upcoming earnings release could be just the ticket to send it on its way.

The daily chart also provides a bullish picture, with the ever-rising lows seen over recent months confirmed by the stochastics. The creation of higher highs and higher lows is a positive signal, yet the biggest challenge will be at £7.64. Should we see a move above that resistance point, then I will feel confident that we are set to regain the highs set in 2014.

The long-term trend is clearly one of overall bullishness and I expect this to regain the ground lost in 2014 to take back the mantle of one of the most consistent retail performers in the FTSE 100

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