Stock of the day 18/02/2015 – Sports Direct International PLC

Sports Direct International remains a fascinating company from the outside, and a frustrating but rewarding stock for investors; this looks set to continue with its interim management statement on Thursday.

The company’s last announcement saw Sports Direct achieve an 11% rise in half year earnings, and confident of reaching its full year targets in July. Since then, the company hit a low of £6.45 in mid-December, a few days after its report and in midst of a global market slump before Christmas. However it managed to start 2015 at £7.18 and by the 20th January spiked to £7.64; this couldn’t be sustained, and its decline culminated in a current trading price of £6.82.



This January spike was lost due to Mike Ashley, the ever-idiosyncratic owner of Sports Direct, announcing he is to sell £117 million worth of shares through Goldman Sachs, in a move many have attributed to Ashley’s wish to take over the struggling Glasgow Rangers. Ashley is already embroiled in dealings with the football club, recently lending them £10 million, half of which was immediately returned to Ashley to repay another loan he had given Rangers. This move has riled up Rangers’ fans, who are mounting a campaign to prevent the rumoured Ashley-takeover, including former player Gordon Ramsay buying up shares.

This is not the only unconventional moves Ashley has made in 2015. Ashley bought clothing company USC before it went out of business through Sports Direct’s Republic arm, even though it was originally being put into administration by Ashley himself. Unsurprisingly this restructuring has caused Ashley to go under investigation for the dubious practices surrounding this situation.

Things were made worse yesterday, as Jeff Blue, strategic development director, announced he would be leaving at the end of March. During the day stocks plunged to £6.50 on the back of the news, before stabilising at £6.79. Blue had dealt with the Debenhams investments that followed Ashley’s risky dalliances with Tesco, and more importantly had been acting as a temporary financial director, a role that hasn’t been officially filled for the past year and 2 months.

On top of this are the problems surrounding the prevalence of zero-hour contracts under Sports Direct International’s purview, something that could lead to a multimillion pound claim from employees. This issue has already seen Ashley attacked by Labour’s Ed Miliband, who promised to address these contracts if he was elected in May.

Despite the seemingly perpetual dilemmas surrounding the company, Sports Direct is set to forecast 16% growth in its bottom line in 2015, and 16% in 2016. Yet Ashley, the currently insurmountable figurehead at the top of Sports Direct, is a constant source of ire for investors as he takes on more and more unneeded risk, be it Tesco or Rangers, meaning the markets will be watching tomorrow’s announcement carefully for signs of stability from the bargain giant.