- Dave Forsey was at U.K. retailer for 32 years, nine as CEO
- Apple, Starbucks have also seen founder return as chief exec
Sports Direct International Plc founder Mike Ashley will take over as chief executive officer, putting the beleaguered billionaire in charge of the U.K. retailer as it reels from slumping profits and accusations of slack governance that have weighed on the shares.
Ashley will replace CEO Dave Forsey, who quit Thursday, and retain the rest of the company’s current management team, Sports Direct said in a statement Friday. The company also appointed Karen Byers as global head of operations and Sean Nevitt as commercial head. The shares rose as much as 8 percent in London.
The company has been under fire from lawmakers and investors after allegations of improper labor practices and inadequate corporate governance led to a vote against the reappointment of Chairman Keith Hellawell at its annual general meeting. This week, Ashley bowed to pressure by appointing an independent law firm to review its boardroom and employment practices. The stock has lost about half its value this year while rival JD Sports Fashion Plc has soared 39 percent.
“Ashley had been effectively running the company anyway, and Forsey was a nominal CEO,” Bryan Roberts, an analyst at TCC Global, said by phone. “Ashley is Sports Direct. He wants to prove to the world that he is capable as a head of a listed business. From a business performance point of view, this is probably good news.”
Ashley is not the first entrepreneur to reassert control over a company he founded after it fell on hard times. Others include Steve Jobs at Apple Inc., Howard Schultz at Starbucks Corp. and Charles Schwab at the brokerage he founded.
Ashley, who holds a majority stake in Sports Direct and also owns English soccer club Newcastle United, will be challenged to turn around a sprawling business that generates sales of almost 3 billion pounds ($3.9 billion) from more than 530 stores. In a June Parliamentary hearing over the company’s working conditions, Ashley acknowledged that he couldn’t oversee all aspects of its operations.
“It is like going out one day and you have got a tiny little inflatable and you are in control, then you wake up one morning and you are an oil tanker,” he told lawmakers. “You cannot be all over that oil tanker.”
Sports Direct has acknowledged that practices such as searching workers before they can leave are “unacceptable.” It says it will offer some employees contracts guaranteeing at least 12 hours per week, after criticism of arrangements providing no minimum amount of work.
That hasn’t placated investors such as Royal London Asset Management, which also point to Ashley’s habit of putting family and friends into key positions at the company. Sports Direct has been without a full-time finance chief for two years.
Forsey had been with the company for 32 years, with the last nine as CEO. The departing executive declined to accept a multi-million pound share award this year. Forsey was criticized in a report by the company’s law firm for not flagging that warehouse workers were effectively being paid below minimum wage due to extensive searches at the end of shifts.
“I feel like I have lost my right arm, but I do hope to have the opportunity to work with Dave again in the future,” Ashley said in the statement.
Sports Direct rose 7 percent to 307.10 pence at 9:46 a.m. in London, trimming its loss this year to 47 percent.
Beyond the governance and labor problems, Sports Direct has also lost customers to competitor JD Sports, which has focused on exclusive Nike and Adidas ranges while Sports Direct emphasizes brands that it owns, such as Kangol and Lonsdale. Ashley started Sports Direct as a single shop in 1982, and expanded it largely by buying sporting-gear labels including Donnay and Karrimor. JD Sports’s market value surpassed that of Sports Direct this year.
As Sports Direct’s treatment of workers has drawn scrutiny, so has its founder’s comportment. Ashley has said he travels to work by helicopter, and he once emptied a wad of 50-pound notes from his pockets while demonstrating how security guards search workers. Sports Direct owns its public-relations adviser, Keith Bishop Associates.
His first presentation to analysts and investors as CEO should draw a crowd, given his criticism of the company’s detractors over the years. Shortly after the company’s initial share sale in 2007, Ashley described institutional investors complaining about early poor performance as a “bunch of cry babies.”