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Gamble of the week: Sports Direct
From an investment perspective, there is a lot to dislike about Sports Direct, says Alex Williams. But could it be worth a punt?
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.
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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.
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