Sports Direct's woes mount with shock Christmas profit warning after 'deterioration in trading conditions'
Billionaire Mike Ashley’s woes have deepened as his Sports Direct sportswear empire hit the City with a shock profit warning.
Sports Direct — already mired in controversy over its working practices and the appointment of his daughter’s 26-year-old boyfriend as the head of the company’s property division — said the firm had “seen a deterioration of trading conditions on the High Street and a continuation of the unseasonal weather over the key Christmas period”.
The trading blow means the company is “no longer confident” of meeting its £420 million profit target. The firm believes the bleak conditions will continue between now and the end of its trading year in April, potentially leaving underlying profits as low as £380 million.
This is the second time in six months that the firm has cut its profit target after lowering it from £480 million to £420 million last July because of a failure to make the anticipated acquisitions which would have boosted sales.
The City marked the shares down 15% or 78.1p to 433.9p on the news, delivering another personal blow to the fortune of Newcastle United owner Ashley, who still owns more than 50% of the sportswear chain he floated in 2007.
Since the beginning of December, shares in the retailer have tanked by more than a third and could be relegated from the FTSE 100.
Thousands of employees are also likely to miss out on lucrative share bonuses as a result of the poor trading.
Last year about 2000 Sports Direct employees each landed bonuses worth £18,000 after meeting profit targets set out in 2011.
Sports Direct is the third retailer this week to admi the unseasonably warm autumn and winter weather had deterred shoppers from buying winter goods. Lord Wolfson’s Next and rival Marks & Spencer both said the weather was partly to blame for poor Christmas trading.
But Sports Direct is also wrestling with problems of its own making.
This week the company sought to play down the role of Michael Murray, who is in a relationship with Ashley’s eldest daughter, Anna, as a consultant tasked with finding new sites for the stores.
The party promoter is not paid a salary and is not a Sports Direct director but he is a director of a handful of private businesses owned by Ashley through his Mash web of companies and could make millions on successful investments for Sports Direct.
Meanwhile, Ashley himself is leading a review into working practices at the company — particularly its main warehouse at Shirebrook in Nottinghamshire — and announced a 15p an hour pay rise for its workforce last week.
