Sports Direct shares surge despite profit plunge

Sports Direct staff to get £1m minimum wage back-pay

12 August

Staff at Sports Direct's Shirebrook warehouse in Derby are to get an estimated £1m in back-pay for minimum wage breaches stretching back over four years.

Today Unite issued a statement announcing the deal, which it says was backed by 96 per cent of its members who are directly employed at Shirebrook.

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Back in July, bosses at the union told MPs that only 200 staff at the facility were employed directly by Sports Direct, out of a daily workforce well in excess of 3,000. So that Unite vote would have related to only a small number of employees.

The majority of staff employed at Sports Direct are supplied in most cases on controversial zero-hours contracts by two agencies, The Best Connection and Transline. The agencies will have to cover the cost of the deal for most affected staff, with individual payouts worth as much as £1,000.

But Unite says it will continue to fight on after Transline said it would only cover half of the underpayments owed to 1,700 staff.

The firm is said to be refusing to pay top-ups to its staff for the period between 2012 and 2014 when they would have worked for the Blue Arrow agency, whose Shirebrook contract it took over. Transline has not been reached for comment.

Unite's assistant general secretary Steve Turner says the company is "disgracefully still trying to short-change workers by seeking to duck its responsibilities".

According to The Guardian, the deal was struck following talks between representatives from the union, Sports Direct and HMRC, which has been investigating the minimum wage breaches.

The breaches were first revealed in the paper's expose of December last year, after undercover reporters found staff were not paid during lengthy after-hours searches and had their pay aggressively docked for minor lateness.

Giving his own evidence to MPs earlier this summer, Sports Direct's owner Mike Ashley admitted the abuses. He said that HMRC was investigating the firm and branded the pay-docking "unacceptable".

He has since improved some practices at the warehouse, but by no means all. In a scathing MPs' report, the working conditions at Sports Direct were compared to a "Victorian workhouse"

Staff are said to be fearful of taking time off, leading to 76 ambulance call-outs in two years and a female employee giving birth in a toilet. There have been accusations of staff being "harangued" by tannoy and rumours that female staff were offered permanent contracts in return for sexual favours.

Manager exodus ramps up pressure on Sports Direct

12 August

A failure to hold on to its white collar workers is piling even more pressure on the British retail group Sports Direct following a bruising parliamentary grilling in June that exposed its lamentable working practices.

In its annual report, the firm notes that the staff turnover rate among its salaried UK staff, which includes its store managers and those working at its head offices, was around three times the UK average last year, at 22 per cent.

Within this, the turnover of managers, assistant managers and footwear managers in the stores' retail outlets was running at between 17 per cent and 21 per cent.

Analysts are warning that the stark figures could have an appreciable impact on the embattled company's commercial performance. Last month, the firm revealed pre-tax profit had fallen eight per cent last year to £275m, at a time when rivals such as JD Sports were surging.

Jane Chesters, a partner at the human resources consultancy Orion Partners, told The Guardian: "Zero churn among staff is not a good thing, but 20 per cent within management roles would be a challenge to an organisation.

"When it comes to store manager roles, the productivity of a store can be as much to do with the calibre of the store manager as the location or the product. If you get high turnover [in those roles] it can have a significant commercial impact."

Turnover among this group is not directly related to the accusations of "Victorian workhouse conditions" in Sports Direct's warehouse, which were contained in the recent excoriating MPs' report.

Warehouse staff are actually employed via agencies, rather than Sports Direct itself, and are typically on flexible contracts.

Some managers may be leaving because of the bad publicity, but they may also be reacting to worsening pay prospects after a 2015 bonus scheme failed to produce anywhere near its previous lucrative payouts.

Last year, Sports Direct handed 2,000 managers and other permanent staff share bonuses worth around £155m in total and an average of £77,000 each, as a four-year scheme launched in 2011 reached maturity.

As a result of its weak trading performance over the last year a 2015 replacement scheme has missed its targets and been closed down.

Sports Direct shares buck losing trend in a big way

11 August

Sports Direct shares ended a prolonged downward spiral and rose at their fastest pace for seven years yesterday, after bosses pledged to buy back around £90m worth of its own stock.

Shares in the embattled retailer immediately leapt more than 15 per cent and were at one point above 300p for the first time since the beginning of the month, before settling up around nine per cent at 281.1p.

The buy-back will see the company purchase around five per cent of its share capital, up to a maximum of 30 million shares, says The Times. It may seek permission to make even more re-purchases at its annual shareholder meeting in September, the Daily Telegraph adds.

Buy-backs are typically made a premium to the prevailing market price and tend to please investors, for whom it amounts to an additional capital distribution.

Sports Direct has been tumbling of late as controversy over its working practices rolls on and a critical parliamentary report slammed the company for treating agency staff like "commodities rather than human beings".

Since the scandal erupted following an expose in The Guardian last year a sales slide has worsened. Three weeks ago the company reported an eight per cent drop in pre-tax profit to £275m.

Investors have also been highly critical of the chain's corporate governance, store layout, and focus on own-brands at the expense of lucrative tie-ups. Rival JD Sports, which has deals with most major sports brands and an exclusive kit deal with the Welsh FA, is enjoying a sales surge.

Even despite the share jump on Thursday, Sports Direct remains well down in the past year. It has lost 66 per cent of its value since last August, with a 58 per cent slump coming since the Guardian's expose was published in December.

Sports Direct workers are 'not treated like human beings'

22 July

Sports Direct and its owner Mike Ashley has been hit by more scathing headlines on working practices after MPs said employers were not treated like "human beings".

Following a parliamentary investigation featuring evidence from a range of senior figures - including, under duress, Ashley himself - a business select committee report concluded conditions at the company's Shirebrook warehouse were akin to a "Victorian workhouse".

The MPs also said Sports Direct's business model, in which staff are indirectly employed through agencies including Transline Group, treated workers as "commodities rather than human beings", reports the BBC.

Parliamentarians heard evidence that staff were afraid to take time off sick in case they lose their jobs, leading to 76 ambulance call-outs in two years and a female employee giving birth in a toilet.

It was also alleged that staff were routinely "harangued" by tannoy; faced a draconian "six strikes and you're out" policy that gave management the right to "discipline or dismiss at will", and that female staff were offered permanent contracts in return for sexual favours.

Some of the practices, such as excessive docking of pay for lateness and lengthy after-hours searches, are said to have left employees effectively earning less than the minimum wage.

HMRC is already investigating the alleged pay breaches – and The Guardian reported earlier this week that this has been extended to include all 13,000 staff in Sports Direct stores.

"It seems incredible that Mike Ashley, who visits the warehouse at least once a week, was unaware of these appalling practices," committee chairman Iain Wright said.

"This suggests Mr Ashley was turning a blind eye to conditions at Sports Direct in the interests of maximising profits, or that there are serious corporate governance failings which left him out of the loop in spite of all the evidence."

Transline figures were considered to have given "deliberately" misleading evidence to the committee and could now be held in contempt of parliament, added the politician.

In response, the company said: "Transline representatives attended the committee to give a transparent account of our operations at Shirebrook. No incorrect or misleading information was given, and we will respond to the committee on any and all issues raised within the report."

Ashley wrote to MPs earlier this month to announce an independent review into working practices by RPC solicitors, the company's independent legal advisors.

He had previously claimed to be undertaking an "internal review", but in evidence to the committee, this appeared to be an open-ended commitment that had no defining focus or deadlines. The new assessment will report back in 90 days.

Sports Direct said: "We will study the contents of the committee's report very carefully. It is our policy to treat all our people with dignity and respect."

Sports Direct's Mike Ashley endures 'light grilling' by MPs on 'his own terms'

08 June

Sports Direct founder Mike Ashley made a series of headline-grabbing admissions during nearly three hours of questioning by MPs yesterday.

Crucially, he admitted that the headline finding of an investigation by The Guardian, saying his firm had effectively paid staff at its Shirebrook warehouse less than the minimum wage, was true.

This contradicts previously repeated assurances from Sports Direct that it was in compliance with legislation that it "takes very seriously".

He also agreed that docking workers 15 minutes' pay for being one minute late is "unfair" and that some of the disciplinary actions under a "six-strikes and you're out" system operated for agency staff were "unacceptable".

But if "Ashley gave the impression of being candid, contrite and conciliatory", he did so "very much on his own terms", argues Ben Wright in the Daily Telegraph.

The "advertised 'grilling' by MPs… turned out to be a light toasting", agrees Nils Pratley in The Guardian.

"By the end, they seemed to think they’d won important concessions and were falling over themselves to thank their witness for being generous with his time," Pratley adds. "[They] should be embarrassed: they will discover Ashley committed himself to virtually nothing."

As an example, he cites the businessman's admission that Sports Direct is the subject of a HMRC investigation into the minimum wage breaches, which could lead to a fine and compensation for staff.

"But such payments will cover no more than a couple of hundred directly employed staff. Will Sports Direct cough up to the thousands of agency workers? None of the MPs asked," Pratley rails.

Ashley also claimed he needed up to six months to look into staff discipline issues that have been well publicised and the subject of a television documentary. Also, despite strong condemnation, no action was promised on allegations of "repugnant" misogyny at Shirebrook.

Wright says Ashley's self-confessed lack of media training – "I'm going to put my foot in my mouth and say what’s in my heart" – was a tactic employed to disarm his questioners.

"Sports Direct has to pull its socks up. Simple as that, fellas… Not just fellas, girls. Sorry," he said at one point, responding to "questions about sexual harassment in the workplace".

Some of these apparent gaffes could, however, point to a brighter future for those investors who have been vocal in the need for change at the top of Sports Direct.

"One minute [I] had a tiny little inflatable and you’re in control and the next minute you are on an oil tanker. Some of the things you’ve said today have shown that it’s definitely outgrown me," he admitted.

He went on to respond to a specific question on management changes by adding: "I am not going to do nothing when I hear stories like this."