Sports Direct shares fall again as founder refuses MPs' summons

Sports Direct’s founder Mike Ashley has refused a formal summons to appear before a committee of MPs investigating pay and conditions at the company. The committee has threatened Ashley with being in contempt of Parliament if he fails to attend the hearing scheduled for 7 June. The Speaker of the House of Commons, John Bercow, has today suggested that MPs could debate Ashley’s refusal to attend. Last year, an investigation by The Guardian found that workers at the company’s Shirebrook warehouse were effectively receiving below the minimum wage.  In an interview in today’s Times, Ashley admitted that the company was in trouble and would not achieve the same profits as last year; leading to a 9% in the company’s share price. 

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 nearly 12% at one point on Tuesday, 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 a Commons select committee wishing to quiz its billionaire boss, who has refused to appear and has accused MPs 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.”

UK listing rules state that companies are “required to notify, via a [regulatory information service], all inside information in its possession as soon as possible”.

The comments by Ashley were made amid a bitter dispute with MPs on the business, innovation and skills select committee, who he has accused of “abusing the parliamentary process” after they 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.

In response to Ashley’s criticisms, Iain Wright, chairman of the BIS committee, raised a point of order in the Commons on Tuesday, asking if the correct parliamentary procedure had been followed in summoning Ashley and for guidance on the next steps parliament could take.

The speaker, John Bercow, said: “It appears to me that, so far, the proper procedures have been followed. As long as the committee is acting within its terms of reference the house expects witnesses to obey the committee’s order to attend.

“If, after due consideration, the honourable gentleman’s committee wishes to take the matter further the next step would be to make a special report to the house setting out the facts. The honourable gentleman may then wish to apply to me to consider the issue as a matter of privilege and to ask me to give it priority in the house … I would then be happy to advise him on the options open to him.”

In December the Guardian revealed how temporary workers at Sports Direct’s Shirebrook depot 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, many of whom 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.