Shambles at Sports Direct

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

Mike Ashley,  founder of Sports Direct International Plc © Chris Ratcliffe/Bloomberg via Getty Images

Mike Ashley: a new low

Mike Ashley wanted to save the high street, says Hannah Uttley in the Daily Mail. Yet the Sports Direct (LSE: SPD) mogul's dreams of returning struggling chains such as House of Fraser to past glories is "turning into a nightmare". Last week's biannual results "set a new low" for Ashley's relations with the City, says Ashley Armstrong in The Times. Management admitted that House of Fraser, which was purchased last year for £90m, may be in "terminal decline". Ashley lashed out at retail foes, restructuring advisers and the government. He also made a "curious recommendation that chief executives should have drug tests to protect them from blackmail". To top it all, he revealed that Sports Direct has been served with an unexpected £600m Belgian tax bill, equivalent to more than five times his firm's profits. The shares slumped by a fifth and have now lost 77% of their value since peaking at 922p in 2014.

The firm has also fallen out with its accountants. Grant Thornton intends to quit as auditor following the tax-bill fiasco. That is no surprise, says Lex in the Financial Times. Sports Direct has been snapping up struggling high-street businesses left, right and centre, making accounting a difficult task. Falling operating profit margins and cash flow suggest that the resulting "jumble" has "stretched management's capabilities" too. The days when Sports Direct was a "fast-growing investor darling" are over.

A case study in failed corporate governance

Even by Ashley's "own bizarre standards", the latest "omnishambles is a new low for UK plc", says Christopher Williams in The Daily Telegraph. Senior management have been jumping ship Friday brought news that the chief financial officer is also leaving and a £5.35m pay package for Ashley's future son-in-law has stoked further criticism. Sports Direct is now "almost a case study in failed corporate governance", says David Cumming of Aviva Investors. "Anyone who cares about proper oversight, control and governance... shouldn't really be an investor in this company."

Ashley's City critics could be getting carried away, says Joe Curtis in City AM. Analysts at Liberum, an investment bank, maintained a buy rating on the shares, noting that the group's attempts to move upmarket from its "stack 'em high, sell 'em low" roots is yielding results. "The core business has been robust against a challenging backdrop and the balance sheet remains strong." Recent failures may encourage Ashley to put empire-building on the back-burner and focus on the retail basics at which he excels, adds Neil Wilson of

The question now is whether brave investors will be able to buy into Sports Direct for much longer, says The Guardian. Ashley already owns more than 60% of the business. Friday's excruciating "farce" was "neither typical nor becoming of a listed business". Despite protestations to the contrary, "Ashley must be considering taking the business private and probably has the liquidity and financial contacts to make it happen".

Britain's ten most-hated shares

CompanySectorShort interest on31 July (%)Short interest on8 July (%)
Kier GroupConstruction11.59.9
Anglo AmericanMining9.99.6
DebenhamsGeneral retailers9.59.5
AASupport services9.410.5
Arrow GlobalFinancial services8.89.9
Babcock InternationalEngineering8.39.9
John Wood GroupOil services8.19.7
Thomas CookTravel7.910
PearsonMedia7.6NEW ENTRY

These are the FTSE 100's ten most unpopular firms, based on the percentage of stock being shorted (the "short interest"). Short-sellers aim to profit from falling prices, so it helps to see what they're betting against. The list can also highlight stocks that may bounce on unexpected good news when short-sellers are forced out of their positions. Pearson is the sole new entry this time. It hopes a shift to digital publishing will combat the falling sales of printed textbooks as students turn to the second-hand books market and online resources. This is especially true of the US, which accounts for two-thirds of sales.


Stockmarkets have a spring in their step

Stockmarkets have a spring in their step

Global stockmarkets have been basking in the post-Covid economic recovery as GDP, retail sales and manufacturing are all on the way back up.
23 Apr 2021
Stockmarkets shrug off turbulence

Stockmarkets shrug off turbulence

Stockmarkets have hit their first bout of turbulence of the year, but most are clinging onto January’s gains.
4 Feb 2021
Things are looking up for income investors as dividend payouts start to rise
Income investing

Things are looking up for income investors as dividend payouts start to rise

UK dividend payouts are ready to grow again, but this crisis has shown why income investors must diversify overseas.
3 May 2021
Three lessons from football’s European Super League disaster

Three lessons from football’s European Super League disaster

Businesses can learn from the failed attempt to create a European Super League, says Matthew Lynn.
2 May 2021

Most Popular

What is hyperinflation and could it happen here?

What is hyperinflation and could it happen here?

The Bank of England has been accused of the kind of money-printing that could lead to Zimbabwe-style hyperinflation. But that's very unlikely to happe…
4 May 2021
Micro-cap stocks: how to get huge returns from tiny firms
Small cap stocks

Micro-cap stocks: how to get huge returns from tiny firms

Micro-cap stocks are often overlooked, but the British market has plenty of them and their potential is massive. Max King picks the best two investmen…
3 May 2021
Copper has hit a ten-year high, but this could just be the start of a huge bull market
Industrial metals

Copper has hit a ten-year high, but this could just be the start of a huge bull market

The price of copper is at its highest for ten years. But supply constraints and a massive rise in demand mean it’s not going to stop there, says Domin…
5 May 2021