Sports Direct shares shrink despite punchy profits
The latest high-profile entrant to the health and fitness industry had analysts scratching their heads on Thursday (17 July), as shares in Sports Direct dropped more than three per cent in the hours after the company reported “record” figures.
The sports group, founded by Newcastle United owner Mike Ashley, announced a 15 per cent rise in annual pre-tax profits – taking them to £239.5m for the year to 17 April 2014. Total group sales were also on the increase to £2.7bn, a 23.8 per cent rise on the same period last year.
City analysts speculated that the behaviour of Ashley may have spooked investors. He won praise earlier in the week for deciding to forego participation in a £200m equity bonus scheme to ensure that full-time Sports Direct employees would be entitled to a greater share of profits. At the same time, this move was criticised as it came after the board had endured three votes and heavy criticism from shareholders to get him a bonus in the first place, leading observers to suggest the executive deputy chairman Ashley was “muscle flexing” in the face of a “weak board.”
The Sports Direct share price has since recovered somewhat, although on Monday afternoon it was still short of last week’s pre-sales report high of 723p per share.
The lion’s share of the company income came through its sportswear brands – including Sports Direct and JD Sports – and Ashley is said to have had synergy with these operations in mind when he decided to make the move into the health club market. Sports Direct has over 600 sports stores in Europe, including 400 in the UK and also owns sports brands such as Dunlop, Everlast and Slazenger.
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