Tuesday 21 November 2017

Sports Direct sales slow as MPs call for Mike Ashley to be questioned

Newcastle United owner and Sports Direct founder Mike Ashley
Newcastle United owner and Sports Direct founder Mike Ashley

Graham Ruddick

Mike Ashley’s Sports Direct has suffered a slowdown in sales as criticism of the company’s treatment of workers continues to grow.

Sports Direct said sales rose 2.6pc for the 13 weeks to January 25, a slowdown from the 6.5pc in the first half of the company’s financial year.

The retailer, founded by Mr Ashley, has become embroiled in controversy again after putting its fashion chain USC into administration. Mr Ashley has been summoned to appear before MPs on the Scottish Affairs Committee after 200 warehouse workers in Ayrshire abruptly lost their jobs as a result of the administration.

The MPs have said they want to question Mr Ashley, who serves as executive vice-chairman, about the job losses and Sports Direct’s use of zero-hour contracts. Sports Direct is facing a legal claim from 300 workers excluded from the company’s generous bonus scheme who could force the company to pay-out £10m if they are successful.

Sports Direct declined to comment on the hearing or its performance beyond a brief trading update on Thursday.

It said that gross profits rose 7.6pc to £347m during the period. This growth helped to reassure the City about the company’s performance, sending its shares up 6, or 1pc, to 692.50p.

Sales in the core sports retail business rose 2.7pc, but sales in the premium lifestyle clothing arm dropped by 0.4pc. Sales in the brands division rose 4.8pc.

Dave Forsey, chief executive of Sports Direct, said trading was “in line with management’s expectations”. He added: “Within sports retail we continue to focus on upgrading our store portfolio and integrating our business in Austria where a weak winter sports season across Europe has proved challenging.”

Mr Forsey said that Sports Direct retains “the ability to invest in margin, inventory and group marketing to deliver long term sustainable growth” and is “very confident” of meeting its full-year underlying profits target of £360m.

Hovever, Freddie George, analyst at Cantor Fitzgerald, criticised the continuing lack of a dividend payment and Sports Direct’s unexpected investments in retailers Tesco, Debenhams and MySale.

He said: “The company has significant free cashflow with [this year’s] capital expenditure forecast at £90m, but does not appear to have a clear strategy to reinvest these resources.

"The focus, in our view, should be on strategic acquisitions rather than on opportunistic investments, developing more broadly the business overseas and growing online sales, although the company currently views this channel as a cost centre. Unhelpfully, in our view, the company still does not have a finance director.”


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