Financial Trading Blog
Stock of the day 10/12/2014 – Sports Direct International PLC
The bargain sports store has had a turbulent time on the markets this year, with a 2014 high of 924.5 in April turning into a low of 559.5 by the FTSE-wide slump in October. Since then share prices have rallied somewhat in anticipation of this half year release, reaching 699.5 in the first week of December.
2014 has also seen Ashley’s company attacked over the prevalence of zero-hour contracts, with 8 out of 10 employees in its 20,000 strong workforce on such a scheme. Such contracts cause instability for workers already on low wages; these schemes became a pre-election target for Labour leader Ed Milliband. Milliand name Sports Direct when discussing his proposed regulation of these contracts if elected. The implementation of such regulation could cause Sports Direct to feel the squeeze due to the sheer amount of its workers on these contracts.
There has also been criticism from some analysts that Sports Direct has been focusing too much on its UK assets, which is detracting from its attempted European expansion. This is epitomised by Ashley’s decision to expand the Sports Direct brand into gyms in the UK. Sports Direct acquired 30 gyms from LA Fitness, the first step in its proposed 200 gyms nationwide. These gyms will approach fitness the way they have approached sports goods: with cheapness in mind. Sign up will only be £10, followed by a £5 month on month fee. These figures far undercut most gym memberships at the moment, as Ashley sees a gap in the market for such a service. However, this announcement spooked investors as they fear Sports Direct’s further diversification from its original MO.
Regardless, Sports Direct is still on target to announce pre-tax profits of £165 million, a 15.3% growth from this time last year. Sports Direct will be hoping it can also announce a strong Black Friday/Cyber Monday period as it gears up for the Christmas period. And whilst it may be a gamble, the company is attempting something new, and potentially very profitable, with its bargain gym idea.
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