Sports Direct shares surge despite profit plunge
Investors give thumbs-up to plans to upgrade stores and appoint permanent finance chief
Mike Ashley tightens grip at Sports Direct
23 September
Mike Ashley has tightened his control of Sports Direct and become chief executive following the shock resignation of Dave Forsey.
The former head of the discount sportswear retailer stepped down merely weeks after the company's annual shareholder meeting, at which the company faced criticism over its corporate governance.
The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Join more than 350,000 subscribers and keep yourself informed with a selection of The Week’s most interesting, enlightening and entertaining stories - plus daily puzzles.
Ashley said he felt as if he had lost his "right arm" after working with Forsey for 32 years.
Sports Direct shares have slumped 50 per cent this year in the wake of a The Guardian expose that it was effectively failing to pay workers the minimum wage and claims in a parliamentary report that warehouse agency staff face "Victorian workhouse" conditions.
Shareholders have been agitating for change and voted against the re-appointment of chairman Keith Hellawell at the annual meeting at the beginning of this month. They have long sought to force an outsider to be appointed to better hold the company’s management - and Ashley himself - to account.
Hellawell, however, is staying put – with a second vote, at which Ashley's 55 per cent voting share is counted, confirming this later this year.
A free daily email with the day’s biggest news and analysis – and the best features from TheWeek.com
It might have been expected that shareholders would not like the prospect of Ashley, already the deputy chairman of the company, stepping in to replace Forsey as it gives him a greater say in the running of the company, which he founded in 1982. But some suggested the move would boost "accountability" and shares surged as much as seven per cent.
Hermes Investment Management told Sky News: "We are very pleased with the appointment of Mike Ashley as CEO [chief executive officer] as it brings clarity to executive accountability at Sports Direct."
Joshua Raymond, a market analyst at XTB.com, told The Guardian: "The fact Mike Ashley immediately assumes the CEO role will keep a laser focused attention on the firm’s ability to recover from the crisis.
"This point is even more pertinent given much of the concern focused on Ashley’s power grip on all aspects of the retailer, a grip which has just become even stronger."
Sports Direct has in recent weeks sought to counter critiques of its working practices. Shop staff will be offered fixed hours to replace their zero-hours contracts, an employee representative will be appointed to its board and an inquiry into staff conditions will be carried out by an independent third party.
Sports Direct bows to pressure for independent inquiry
20 September
Sports Direct has bowed to pressure from its shareholders and agreed to an independent review of its working practices and corporate governance.
The high street retailer, which has been under pressure over the allegedly "Victorian" conditions at its warehouse in Shirebrook, Derbyshire, originally said an inquiry would be carried out by law firm Reynolds Porter Chamberlain (RPC), which previously worked "extensively" for the company and its founder and majority owner, Mike Ashley, says The Guardian.
But in a statement released this morning, the store said: "Sports Direct today announces that the forthcoming 360-degree review of working practices and corporate governance which was announced on 6 September 2016 and which was to be led by RPC will now be led by an independent party other than RPC."
The move follows a call from investors at the retailer's AGM earlier this month, when, supporting a union resolution on the issue, they expressed strong backing for a truly independent inquiry.
Large shareholders also told the Sports Direct board they favoured employing another firm.
Speaking on BBC Breakfast this morning, Ashley defended his supposedly harsh working practices, saying he has paid more than £200m in bonuses in the past five years to staff.
"The cleaning lady got an £80,000 bonus on top of her normal pay - nobody [else] in the UK has done that," he said.
Last month, Sports Direct promised to give retail staff the opportunity to swap their zero-hours contracts for those with a guaranteed number, although the offer did not extend to the 2,400 agency workers employed in its warehouse.
Speaking of RPC's previous report and the findings of a House of Commons select committee, Ashley said he had not known how bad the situation was: "You would be surprised how little I knew about what was going on and that's really where the failing was," he said.
"How do I know what a night shift does from 12 at night to seven or eight in the morning? I don't work there on Saturdays and Sundays and there are lots of hours I am not there.
"Should I have known more? Yes. Was I aware of the some of the things that were going on? Absolutely not."
Sports Direct shares slump after double downgrade
16 September
Sport Direct shares tumbled yesterday after a double downgrade by two influential brokers.
Goldman Sachs, which told investors to sell the stock for the first time in four years back in May, yesterday cut the forecast for full-year profit at the sportswear retailer.
The bank cited Sports Direct's own admission at its annual shareholder meeting earlier this month that operating costs would rise and that property writedowns would amount to £120m, a figure well above the expected £95m.
Sports Direct shares were down by close to nine per cent mid-afternoon yesterday and eventually recovered a little to close down around 5.2 per cent at 291.2p.
They were down another one per cent this afternoon at 287p and have now lost more than two-thirds of their value since their 2014 peak. The company has also lost more than 17 per cent of its value since the start of the month alone, says The Guardian.
Adding to the dour mood was a separate downgrade from Citigroup, Sports Direct's joint in-house broker, which the Financial Times says now rates the company's stock as "neutral".
Analysts at the bank cited the strategy outlined at the shareholder meeting, including reversing the policy of taking a hit on branded goods in order to get customers through the door, as likely to weigh on revenues.
Sports Direct is also planning to invest in larger stores and to improve its shops' layout as part of an expansion programme that is controversially being led by the partner of founder Mike Ashley's own daughter.
"As the strategy is a radical change to the business model that has worked well for the last 30 years and is likely to be dilutive to group returns, then it is a safe bet that Sports Direct is not moving to this strategy willingly," Citigroup said.
Sports Direct has lost customers during a difficult period that has seen it heavily criticised by MPs for its treatment of workers. It has announced reforms including an end to zero-hours contracts and the appointment of a workers' representative to its board.
Sports Direct to include worker representative on board
7 September
High street store Sports Direct has announced plans to include a workers' representative on its board after an inquiry commissioned by the retailer found "serious shortcomings" in the way it treats staff.
The measure is the latest in a series of ideas floated by the company in an attempt to move on from a scandal that has seen its share price drop 40 per cent in the year to date.
Sports Direct earlier announced it will abolish zero-hours contracts for its directly employed retail staff – though that still leaves the 4,000 agency workers in its Derbyshire warehouse without guaranteed hours.
The retailer has also admitted that workers ended up earning less than the minimum wage once the time taken to search them as they left the warehouse – time for which they were not paid – was added into the equation.
It said that its failure to pay workers the minimum wage had been an oversight and pledged to pay its warehouse staff above that level in future.
The number of searches staff undergo will also be reduced, while a full-time nurse will be employed at the warehouse. The six-strikes rule that made staff fearful of taking toilet breaks or having conversations is to be suspended.
The measures have all been announced in the week of the company's AGM and are seen by some commentators as a PR exercise.
Conditions at the warehouse in Shirebrook were described as "Victorian" by a select committee of MPs that looked into Sports Direct's treatment of staff after the allegations were published in the media last year.
Yesterday, Buzzfeed published part of an email it said Sports Direct founder Mike Ashley – who still owns 55 per cent of the company's stock – had sent to all staff, apologising for "shortcomings" in the firm's working practices.
The company also revealed this morning that its chairman, Sir Keith Hellawell, a former senior police officer and government drug tsar, offered to resign at the weekend.
Sports Direct asked Hellawell to stay on "despite threats by major investors to vote against him at Wednesday's annual shareholder meeting", says The Guardian.
Sports Direct apologises and drops zero-hours contracts
6 September
High street store Sports Direct is to stop giving casual staff zero-hours contracts and has also apologised for "serious shortcomings" in the way it treats employees.
The retailer says it will now offer casual staff guaranteed hours and it will also drop the "six strikes" policy which meant staff could be fired for excessive chatting or long toilet breaks.
In a statement, the firm admitted there were "serious shortcomings... in working practices in [the] warehouse which the board deeply regrets and apologises for".
Sports Direct also admitted that the "six strikes" policy "contributed at times to a hierarchical model that placed workers in an uncertain and difficult position". The store pledged to ensure no further "culture of fear".
But The Guardian, which uncovered the harsh working practices at the company last year, notes that Sports Direct has not offered guaranteed hours to 4,000 agency workers at its Derbyshire warehouse.
The decision comes after a "stinging" report commissioned by the firm itself, says Sky News, which showed the vast majority of Sports Direct's 27,000 non-agency staff were on zero-hours contracts.
The firm has previously admitted that workers were effectively paid less than the minimum wage and promised to boost payments. It blamed the underpayment on an administrative error.
Other measures announced today include fewer searches on staff leaving the warehouse and a reduction in the number of brands they are banned from wearing, from more than 800 to 30, says the Guardian.
The store has now agreed to employ a full-time staff and welfare officer. There will also be a confidential system to allow staff to report sexual harassment after claims that female staff suffered intimidating behaviour in the warehouse.
Chief executive Dave Forsey gave up a bonus worth almost £4m this year after failing to tell billionaire founder Mike Ashley about the potential for employees to earn below the minimum wage.
Sports Direct's share price is down 40 per cent over the year to date, but rose 0.8 per cent this morning.