Sports Direct shares are plummeting after a huge bad news dump
Joe Giddens / PA Wire/Press Association Images
Sports Direct founder Mike Ashley outside the Sports Direct headquarters in Shirebrook, Derbyshire.
Sports Direct shares are down over 10% on Wednesday morning after a flurry of bad news, including a profit warning and the quashing of takeover speculation.
Sports Direct said in two statements on Wednesday that:
- Earnings for 2017 are forecast to be £300 million ($402 million), down from £381.4 million in 2016;
- Sales up 9% but operating costs set to rise by 8%;
- Founder and executive chairman Mike Ashley won’t take the company private despite speculation;
- Sports Direct refused the resignation of under-pressure chairman Dr. Keith Hellawell;
- Michael Murray, the 26-year-old boyfriend of Ashley’s daughter, will continue to run the company’s property arm and spend £300 million a year on acquiring sites;
- Ashley will execute a 2-4 year turnaround plan.
Here is how shares have reacted to all the news:
Investing.com
Shares had risen over 5% on Tuesday following the publication of a report into working practices at Sports Direct. Legal firm RPC identified “serious shortcomings” in the firm’s working practices which its board “deeply regrets and apologises for.”
Sports Direct is ditching zero-hour contracts as a result of the report, which explains the rise in operating costs. The company is also pledging to put workers’ representatives on the company board.
There was speculation in the wake of the report that majority shareholder and founder Mike Ashley could launch a bid to take the company private and the quashing of this rumour explains some of the share price fall.
But the refusal of Dr. Keith Hellawell’s resignation is also likely a factor. Hellawell came in for criticism in the report and shareholder groups have been pressing for corporate governance reforms. The refused resignation suggests this will be unlikely. (The profit warning is, of course, also a big factor in the share price fall.)
The share price reaction means Sports Direct will likely be in for an embattled AGM today, as shareholders head to its Derbyshire headquarters to grill management and the board. BI will be at the AGM and reporting on what happens.
Sports Direct has been under pressure from the press, MPs, and investors for over a year, amid scrutiny of its working practices and warehouse conditions. An investigation by the UK parliament’s Business, Innovation, and Skills Committee concluded that Sports Direct’s warehouses were run like “a Victorian workhouse.”
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