Analysts had excitedly been sharpening their pencils in expectation of a visit to Sports Direct’s Shirebrook head office, where they would have the chance to meet the management, ask questions and rebuild some of the bridges between retailer and City that have collapsed along with the company’s share price.
But it was not to be. The trip was either cancelled, as the analysts see it, or never formally arranged in the first place as the retailer could argue. The completion of the Everlast acquisition – Sports Direct’s biggest so far – also threw the timing out. In fact, it hardly matters. The important thing is that, yet again, there was a communications breakdown.
If there was any evidence that Sports Direct was doing well, the City might forgive founder and executive deputy chairman Mike Ashley’s mercurial behaviour. But the scant information available seems to indicate Sports Direct is on an Eddie the Eagle-style downward trajectory.
There is a sense that the retailer is heading for a defining moment. Sales and profits are under pressure, its share price has plummeted and debt is ballooning.
Property deals, a string of eccentric investments and share buy-backs will all contribute to gross debt that is likely to rocket from£38 million to more than£500 million this year.
And who is presiding over it all? Sports Direct has no permanent chairman at present and, aside from acting chairman Simon Bentley, the company has only one non-executive director. Ashley seems to treat the business as if it remains his private fiefdom.
As far as investors are concerned, the need for a new chairman is urgent. A source familiar with the situation said the hope remains that a big hitter will be in place by the end of this year and that efforts are under way to increase the count of non-executives.
That would be welcome news but, at present, Panmure Gordon’s Philip Dorgan, among the most bearish analysts on Sports Direct, has a price target of 80p. Seymour Pierce’s Richard Ratner, who is among the more bullish, can’t muster anything more enthusiastic than a hold.
Sports Direct’s IPO has been a disaster. Merrill Lynch, which brought the business to market, should do the decent thing and offer to buy the stock back at 300p a share.
George MacDonald is deputy editor of Retail Week