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
(Image credit: Mike Ashley, founder of Sports Direct International Plc © Chris Ratcliffe/Bloomberg via Getty Images)

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."

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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

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PearsonMedia7.6NEW ENTRY

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