Shares in Sports Direct have slumped again after the company’s founder Mike Ashley appeared to announce the retailer’s latest profit warning during a media interview.
The group’s shares led the FTSE 250 fallers, shedding about 9%, in the latest setback for the retailer, which was the subject of a Guardian investigation into pay and working conditions at its warehouse in December.
Since then, the company has been pursued by MPs on a parliamentary select committee wishing to quiz its billionaire boss, who has refused to appear and accused the ministers of “showboating”.
In an interview with the Times on Tuesday, Ashley said: “We are in trouble, we are not trading very well. We can’t make the same profit we made last year. We are supposed to be taking the profits up, they are not supposed to be coming down, and the more the media frenzy feeds on it, the more it affects us.”
In January, nearly half a billion pounds was wiped from Sports Direct’s stock market value after the retailer shocked the City with a warning that annual profits could be £40m lower than the £420m expected.
In its stock market statement at the time, Sports Direct said: “Management’s current expectation for the full year is for adjusted underlying Ebitda [earnings before interest tax depreciation and amortisation] (before share scheme costs) of between £380m and £420m.”
In its last financial year, the group made £383.2m of Ebitda and the City immediately interpreted Ashley’s comments about falling profits as another warning, despite no formal statement being made to the stock exchange.
Nick Bubb, a veteran City retail analyst, said: “Given Mike Ashley’s startling admission to the Times today that profits will be down this year, you might have expected an announcement this morning from Sports Direct revising down their profit guidance, but no such announcement has yet been forthcoming.”
The comments by Ashley were made amid a bitter dispute with MPs on the business, innovation and skills select committee, which has summoned him to appear to answer questions on working conditions within his business. He has also launched a PR offensive by inviting selected media outlets to visit the group’s warehouse in Shirebrook, Derbyshire.
Iain Wright, chairman of the BIS committee, said: “Select committees rightly expect witnesses to attend evidence sessions. Business leaders and others regularly appear in front of select committees when invited and we see no reason why Mr Ashley should expect to be exempt from the normal parliamentary process.
“Among other issues, we are keen to question Mr Ashley on the progress of the review he is leading on working practices at Sports Direct. As a committee we expect Mr Ashley to attend on 7 June and to take this opportunity to respond on public record to the serious concerns regarding the treatment of workers at Sports Direct. We are still to receive a formal response from Mr Ashley to our invitation to attend.”
In December the Guardian revealed how temporary workers at the facility were receiving hourly rates of pay that were in effect below the minimum wage, over the total time they were required to spend in the warehouse and after financial penalties.
All warehouse workers, who are employed through agencies, were kept onsite at the end of each shift to undergo a compulsory search by Sports Direct security staff, with the experience of the Guardian reporters suggesting this typically added another hour and 15 minutes to the working week, which was unpaid.
Furthermore, Sports Direct workers were docked 15 minutes of pay for clocking in as little as one minute late – even if they had arrived on the site on time.
Zoe Lagadec, a solicitor at Mulberry’s Employment Law Solicitors, said the searches “should be considered working time and therefore paid in accordance with the national minimum wage provisions”, while the penalties were “arguably a breach of the national minimum wage, which carries both criminal and civil sanctions”.
In his interview with the Times, Ashley also appeared to confirm problems with the compulsory searches. He said: “There is no question we had issues with security. The original [warehouse] building was built 10 years ago and it was never built to cope with that many people. We had 10 times the capacity of people trying to get in and out during shift changes.”
He added that was why a decision was taken some time ago – “before anyone ever said anything about the security queues” – to expand.
