Sports Direct shares are crashing after a financial watchdog announced an investigation – Business Insider
LONDON — Shares in embattled discount retailer Sports Direct
are crashing on Monday morning after the financial reporting
watchdog announced it is investigating the company.
The Financial Reporting Council (FRC) announced it is
investigating the “preparation, approval and audit” of Sports
Direct’s most recent results for failing to disclose Barlin
Delivery as “a related party” in the company’s financial
statements. The Financial Times revealed in August that
Barlin, which handles international deliveries for the discount
sports retailer, is run by Sports Direct founder Mike Ashley’s
The FRC confirmed to Business Insider that the investigation is
into Sports Direct’s accountants Grant Thornton, rather than
Sports Direct itself. Sports Direct told the FT its auditors
Grant Thornton decided no disclosure was necessary. Rules require
company’s to detail engagements with “related parties” to ensure
there are no conflicts of interest.
Barlin makes an estimated £300,000 a year from Sports Direct,
according to the FT, and further investigation by Business
Insider suggests Barlin is also working with
other companies owned by Mike Ashley, including USC, Karrimor,
and the online shop of football club Rangers.
Business Insider has contacted Sports Direct for comment and
update when we hear back.
The announcement of the FRC investigation, the latest in a run of
bad news for Sports Direct, sent shares crashing over 3%. The
stock is still down over 2% at just after 10.00 a.m. GMT (5.00
a.m. ET), around half an hour after the news broke:Investing.com
Barlin’s headquarters are registered at a detached house in a
Cleethorpes cul-de-sac, a small seaside resort on the Humber
estuary in Lincolnshire, and the company does not own any trucks
or employ any drivers, instead working as an intermediary that
arranges delivery for Sports Direct.
It is not the first time business relationships between Sports
Direct and Mike Ashley’s immediate family have been uncovered.
Last year it was revealed that the discount sports goods retailer
gave the boyfriend of owner Mike Ashley’s daughter a high-level
job and a £10.7 million loan.
The FRC investigation is just the latest in a string of bad news
for the discount sports retailers, once one of the favourite
stocks of fund managers in the City.
The retailer agreed to pay £1 million to former staff earlier
this year after admitting it had effectively paid warehouse
workers less than minimum wage. That admission came after a
series of press investigations and a Parliamentary inquiry that
concluded conditions at Sports Direct’s warehouses were like a
CEO Dave Forsey resigned in September, with
founder Mike Ashley stepping in and vowing to turn around the
business. However, earlier this month the company was accused
spying on MPs during a surprise warehouse visit to inspect
Sports Direct’s share price has collapsed almost 30% since the
start of the year, due to the political pressure and
struggling business performance.