Corporate jets, zero-hours, mystery cameras: there is rarely a dull moment in the life of Sports Direct.
The retailer’s half-year figures were predictably grim reading today as it revealed underlying pre-tax profits plunged 57%.
The Mike Ashley-controlled firm has seen its bottom line hit by the post-Brexit slump in sterling, which knocked its margins down. Investment in staff also dragged down profits.
Sports Direct has been under fire over allegations around working conditions at its Shirebrook warehouse and its corporate governance.
Ashley, who took over as chief executive in September, admitted today it has been a “tough” six months for its people and the business.
It also emerged that Sports Direct is about to take delivery of a $51m (£40m) corporate plane.
Here we look at what we learnt from the update:
‘Selfridges of sports’ target remains
Ashley repeated today his audacious aim to become the “Selfridges of sports retail”.
Sports Direct is focusing on a “new generation” of more premium stores, which it hopes will re-energise its relationship with third-party brands such as Nike and Adidas.
“Ashley repeated today his audacious aim to become the ‘Selfridges of sports retail’”
The idea is that the majority of the offer in these stores will sell third-party brands. A key part of this “new generation” concept is attached gyms. Sports Direct plans to open about five more premium stores by April, to add to the 10 already open.
The retailer plans to invest about £300m in buying freehold property in the next two to four years. “A decent statement of intent,” said broker Peel Hunt.
Corporate governance question marks
Sports Direct is still dogged by the fact it has not had a permanent chief financial officer since late 2013.
Acting finance boss Matt Pearson is due to stand down at the end of this month after a year-and-a-half in the role.
“Sports Direct is still dogged by the fact it has not had a permanent chief financial officer since late 2013”
Investors hoping for a big name replacement were left disappointed today. Instead Herbert Monteith – part of Sports Direct’s finance team – has taken the role of “interim head of finance” until a permanent replacement is found.
Rumours had surfaced of two big name appointments to the board. Instead the company unveiled banking veteran David Brayshaw as a new non-executive director.
Meanwhile, chairman Keith Hellawell will face a vote for re-election on January 5 after a majority of independent shareholders voted against his reappointment.
However, he appears to continue to have Ashley’s backing.
Taking to the skies
Sports Direct said it will take delivery of a corporate plane in the “coming weeks”.
The aircraft, costing $51m (£40m), is designed to “facilitate efficiencies” around the use of management time. Staff can also charter the plane at “open market rates”. However, as broker Hargreaves Lansdown noted this is “probably of little interest to the vast majority [of staff]”.
It is an interesting move in the light of other firms moving away from having aircraft over fears it represents corporate extravagance. Tesco boss Dave Lewis, for example, has sold off the grocer’s five company jets.
Sports Direct’s other assets also include a helicopter and the Best Western Lion hotel in Worksop. The retailer said it believes these assets “generate substantial operational benefits”.
Ashley still keeping it in the family
Sports Direct also revealed it has struck an agreement with a company called Double Take, which has the rights to the beauty brand Sport FX.
Double Take is owned by Mike Ashley’s Mash Holdings, in which his daughter Matilda is also a director.
The retailer also has a deal with a delivery company called Barlin, which is owned by Mike Ashley’s brother John. The tie-up is under scrutiny from City watchdogs, the Financial Reporting Council.
Zero hours unlikely to be scrapped… for now
As part of a review of its working practices, Sports Direct has looked at the controversial issue of zero-hours contracts.
However, it says “initial indications” show that demand to “move away” from the contracts is “low”. But it adds: “The group will extend its consultation across the business and now include exploring arrangements that may prove more attractive.”
Sticking up for its staff
Ashley says his “immediate priority” is to “protect the people at Sports Direct” who he says are “hardworking and loyal”.
“I have no doubt that the extreme political, union and media campaign waged against this company has not only damaged its reputation and influenced our customers, it has impacted negatively on the morale of our people”
Keith Hellawell, Sports Direct
Hellawell, meanwhile, did not hold back in his criticism of those who have attacked Sports Direct. “I have no doubt that the extreme political, union and media campaign waged against this company has not only damaged its reputation and influenced our customers, it has impacted negatively on the morale of our people.
“I begin to question whether this intense scrutiny is all ethically motivated. One of the most damaging consequences has been for the very people our critics supposedly support.”
A Twitter account and the hashtag #SDfamily has also been launched, with the aim apparently to prove that the company is one big happy family.
It seems those using the hashtag are not afraid to have a poke at Iain Wright MP, the Beatles-loving Labour politician who has led the charge in scrutinising Sports Direct.
The numbers are unlikely to improve soon
Sports Direct warned that “strategic challenges” and currency headwinds will continue to dampen its financial performance in the medium term.