Shares in Sports Direct(LSE: SPD) are reeling after a public relations debacle caused by its larger-than-life founder, Mike Ashley. Rather than make an announcement to the stock exchange, Ashley issued the company's latest profit warning through The Times this week.
"We are in trouble, we are not trading very well," he said, during a walkabout at the company's warehouse in Derbyshire. "We can't make the same profit we made last year." Shares fell 10%.
Sports Direct is bouncing from one controversy to another. An investigation by The Guardian has alleged that workers at its main warehouse are harangued by loud-hailer and paid less than the minimum wage. Of its 28,000 staff, 15,000 are reportedly on zero-hour contracts, meaning shifts can be changed or cancelled without any warning.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Ashley, who owns 55% of the discount retailer, was summoned to a parliamentary hearing in June on poor working practices, but he declined, calling MPs "a joke". He has also threatened to "box" former Labour leader Ed Miliband, who accused the company of using "Victorian" employment methods.
From an investment perspective, there is a lot to dislike about Sports Direct. As the majority shareholder, Ashley has asked investors to stop asking questions from the "cheap seats". He's skipped board meetings and recently appointed his daughter's 26-year-old boyfriend to head the company's property portfolio."This is not a company like most other companies," one analyst told the Financial Times.
But Ashley has his supporters.He is a former squash coach who has built Sports Direct from scratch into a FTSE 100 company, pocketing £930m at the time of its float in 2007. Some shareholders tried to oust him last year, but the move was overwhelmingly quashed.
Act now: First Direct’s £175 switching bonus ending soon
First Direct has launched a £12,500 prize draw on top of its £175 cash bonus - but they both finish soon, so you’ll need to be quick
By Vaishali Varu Published
Credit card providers slash 0% balance transfer deals
Customers face a double whammy of rising interest rates and shorter 0% balance transfer periods. We look at what’s going on in the credit card market and why you’ll need to act fast to get the top 0% balance transfer deal
By Ruth Emery Published
Frasers is showing the rest of the retail world how it’s done
Tips Frasers Group – formerly known as Sports Direct – is a company many people love to hate. But its policy of judicious acquisitions and its move upmarket have proved to be a huge success and profits are booming, says Rupert Hargreaves.
By Rupert Hargreaves Published
Shambles at Sports Direct
Features A chaotic set of results at Sports Direct last week wiped a fifth off the shares and fuelled speculation that the company will be taken private. Alex Rankine reports
By Alex Rankine Published
Athleisure: a tale of two retailers
Features The athleisure craze is helping JD Sports outrun long-term rival Sports Direct – but its shares are looking pricey, says Alex Williams.
By Alex Williams Published