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Sports Direct shares plunge as sales growth stalls Sports Direct shares plunge as sales growth stalls
(about 2 hours later)
More than £500m has been wiped off the stock market value of Sports Direct, the retail chain controlled by the billionaire Mike Ashley, as its shares fell by 13% despite a big increase in profits. More than £500m has been wiped off the stock market value of Sports Direct, the retail chain controlled by the billionaire Mike Ashley, after the company reported lacklustre results and the City reacted to criticisms of the way its workers are treated.
Results from the group, whose profits rose by 25%, came amid mounting criticism after an investigation by the Guardian revealed that temporary workers at Sports Direct are receiving effective hourly rates of pay below the minimum wage. The retailer’s shares fell 13% on a combination of the figures and the mounting controversy over working conditions in the group’s Shirebrook warehouse, which is predominantly staffed by temporary workers.
Warehouse staff at the company, which is controlled by Britain’s 22nd richest man, are required to go through searches at the end of each shift, for which their time is unpaid, while they also suffer harsh deductions from their wage packets for clocking in for a shift just one minute late. Its revenue edged up 0.1% to £1.4bn in the first six months of the group’s financial year as underlying profits rose 3.6% to £166m.
The rigorous searches of warehouse staff – who are asked to roll up trouser legs and show the top of underwear – typically take 15 minutes and illustrate how concerned management is about potential theft. This typically adds another hour and 15 minutes to the working week and is unpaid. On Wednesday, an investigation by the Guardian revealed that temporary workers at Sports Direct are receiving effective hourly rates of pay below the minimum wage.
Julie Palmer, a partner at Begbies Traynor, said: “Investors have been left disappointed by the retailer’s weak sales performance, particularly across its struggling premium lifestyle division, at a time when many of its high street rivals are streaking ahead.
“Shareholder rebellions and public protests around Sports Direct’s controversial zero-hour contracts and questionable warehouse working conditions have kept the retailer in the public eye for all the wrong reasons.”
Warehouse staff at the company are required to go through searches at the end of each shift, for which their time is unpaid, while they also suffer harsh deductions from their wage packets for clocking in for a shift just one minute late.
The rigorous searches of warehouse staff – who are asked to roll up trouser legs and show the top of underwear – typically take 15 minutes and illustrate how concerned management is about potential theft. This typically adds another hour and 15 minutes to the working week, and is unpaid.
Related: Revealed: how Sports Direct effectively pays below minimum wageRelated: Revealed: how Sports Direct effectively pays below minimum wage
The company said in its results statement on Thursday that the waiting time during the searches had been reduced. “A number of issues were raised by shareholders at our AGM which we have addressed, for example the inconvenience experienced by some warehouse workers from the logistics of the security process when exiting the warehouse. Following a review, the process has been streamlined, which has led to a reduction in waiting time,” the statement said.The company said in its results statement on Thursday that the waiting time during the searches had been reduced. “A number of issues were raised by shareholders at our AGM which we have addressed, for example the inconvenience experienced by some warehouse workers from the logistics of the security process when exiting the warehouse. Following a review, the process has been streamlined, which has led to a reduction in waiting time,” the statement said.
Sports Direct has repeatedly come under fire for the working conditions within its warehouse in Shirebrook, Derbyshire, where it has been claimed that more than 80% of staff are on zero-hours contracts.
The retailer said casual workers were an “integral component” of its workforce. “To be clear, no warehouse workers are on ‘zero-hour’ contracts, all have contracted hours with the agencies. In retail, casual workers find the flexibility offered by these arrangements very useful. We comply fully with all applicable legal requirements and will continue to keep these under review,” it said.The retailer said casual workers were an “integral component” of its workforce. “To be clear, no warehouse workers are on ‘zero-hour’ contracts, all have contracted hours with the agencies. In retail, casual workers find the flexibility offered by these arrangements very useful. We comply fully with all applicable legal requirements and will continue to keep these under review,” it said.
One institutional investor warned that the price would continue to be affected by the corporate governance issues. The shares were the biggest faller in the FTSE 100 index of leading companies. One institutional investor warned that the price would continue to be affected by the company’s corporate governance issues.
Ashley Hamilton Claxton, a corporate governance manager at Royal London Asset Management, which manages more than £86bn in assets, said if the company continued to ignore the issues, it ran the risk of “eroding shareholder value”.Ashley Hamilton Claxton, a corporate governance manager at Royal London Asset Management, which manages more than £86bn in assets, said if the company continued to ignore the issues, it ran the risk of “eroding shareholder value”.
“While we acknowledge the strong financial results released by Sports Direct, we remain concerned about corporate governance issues at the company and believe these issues will continue to place a drag on the share price over the long term,” she said. “We remain concerned about corporate governance issues at the company and believe these issues will continue to place a drag on the share price over the long term,” she said.
“Until the company improves its governance and relationships with employees, shareholders face substantial risks. We maintain that companies such as Sports Direct need strong governance in place to protect the interests of minority shareholders, employees and other stakeholders.”“Until the company improves its governance and relationships with employees, shareholders face substantial risks. We maintain that companies such as Sports Direct need strong governance in place to protect the interests of minority shareholders, employees and other stakeholders.”
The TUC general secretary, Frances O’Grady, responded to the Guardian revelations by saying: “It will surprise no one that Sports Direct is hitting the headlines for the wrong reasons again. All workers should be paid at least the minimum wage for every minute they are required to be on company premises. If the allegations against Sports Direct are found to be true, the government must make sure all their staff receive the full pay they are entitled to.”The TUC general secretary, Frances O’Grady, responded to the Guardian revelations by saying: “It will surprise no one that Sports Direct is hitting the headlines for the wrong reasons again. All workers should be paid at least the minimum wage for every minute they are required to be on company premises. If the allegations against Sports Direct are found to be true, the government must make sure all their staff receive the full pay they are entitled to.”
Sports Direct’s reported profits before tax rose to £187.3m in the six months to 25 October.. Underlying earnings were up 7.6% to £218.5m. Sports Direct said it was confident of meeting its target of £420m in underlying earnings for the full year. Freddie George, an analyst at Cantor Fitzgerald, said the results disappointed, with underlying pre-tax profits below the Bloomberg consensus of £180m.
Freddie George, an analyst at Cantor Fitzgerald, said the results disappointed, with underlying pre-tax profits up 3.6% to £166.4m, against a Bloomberg consensus of £180m, with sales effectively flat – up 0.1% to £1.4bn.
“Retail sales declined by 0.7% and were impacted by difficult comparatives, while premium sales were affected by USC [fashion] store closures,” he said.“Retail sales declined by 0.7% and were impacted by difficult comparatives, while premium sales were affected by USC [fashion] store closures,” he said.
The retailer has opened larger stores in Leeds and Plymouth, stores with gyms in St Helens and Newport and is aiming for 30-40 new shops in the UK this year, after opening 28 in its first half. Sports Direct has opened five further concessions within Debenhams stores.The retailer has opened larger stores in Leeds and Plymouth, stores with gyms in St Helens and Newport and is aiming for 30-40 new shops in the UK this year, after opening 28 in its first half. Sports Direct has opened five further concessions within Debenhams stores.
Its chief executive, Dave Forsey, said: “We look forward to 2016 with confidence ahead of the Olympic Games in Rio de Janeiro and the 2016 European football championships in which England, Wales, Northern Ireland and the Republic of Ireland will be competing.”Its chief executive, Dave Forsey, said: “We look forward to 2016 with confidence ahead of the Olympic Games in Rio de Janeiro and the 2016 European football championships in which England, Wales, Northern Ireland and the Republic of Ireland will be competing.”
In October, Forsey pleaded not guilty to a criminal charge of failing to give 30 days’ notice for redundancies at USC, one of the group’s subsidiaries. The next hearing of the case is scheduled for the spring.In October, Forsey pleaded not guilty to a criminal charge of failing to give 30 days’ notice for redundancies at USC, one of the group’s subsidiaries. The next hearing of the case is scheduled for the spring.