Sports Direct Worker Exodus Adds to Woes for Founder Ashley

  • Staff turnover rises amid criticism of working conditions
  • U.K. retailer yet to fill board slot and full-time CFO role

Mike Ashley.

Photographer: Simon Dawson/Bloomberg

Mike Ashley, the British billionaire behind embattled retailer Sports Direct International Plc, has grappled with declining growth, a plunging share price and a parliamentary grilling this year. Now he’s got another problem: Disappearing employees.

Turnover among Sports Direct’s salaried U.K. staff rose by more than three percentage points last year to 22 percent, the company disclosed in its annual report. That’s almost three times the average rate of U.K. employers, according to a 2015 survey by the Chartered Institute of Personnel and Development.

“An increase of turnover of that magnitude is incredibly worrying,” Bryan Roberts, a retail analyst at consultancy TCC Global, said by phone. “Below senior level at Sports Direct it’s hard to achieve any sort of discernible benefits above and beyond your hourly wage.”

The staff exodus will heap pressure on founder and deputy chairman Ashley, who’s spent more than two years trying to fill the vacant role of finance director and was admonished by U.K. lawmakers in July for presiding over “appalling” labor practices in Sports Direct’s warehouses. About 80 percent of the retailer’s workforce is employed on so-called “zero-hours” contracts, which give no set guarantee of work. The turnover figure excludes those employees.

A Sports Direct spokesperson didn’t respond to a request for comment about the increase in staff turnover.

The criticisms have added to investors’ long-standing concerns over corporate governance. Bob Mellors, the company’s last permanent chief financial officer, retired in December 2013. Sports Direct failed to fill the post for 18 months before appointing company veteran Matt Pearson in an interim capacity, a role that he has now been performing for more than a year.

‘Red Flag’

“Sports Direct’s continued inaction in filling this post is a clear corporate governance red flag for us as investors,” said Mike Fox, head of sustainable investments at Royal London Asset Management, which owns 0.18 percent of the shares. “The interim situation is inappropriate for a company of this size.” 

Ashley’s wallet has been hit as well as his reputation. After three profit warnings, shares in the U.K.’s largest sporting-goods retailer have lost almost half their value this year. Ashley’s net worth has plunged 58 percent to 2.51 billion pounds ($3.28 billion) in that time, according to the Bloomberg Billionaire’s Index. The shares fell 1 percent to 291.8 pence at 9:30 a.m. in London.

Sports Direct employs 22,618 people in the U.K., according to its annual report, a figure that excludes those who work for hourly wages. The increasing staff flux will bring disruption and increased costs at a time of “considerable” upheaval, TCC’s Roberts said. Rival retailer JD Sports Fashion Plc has taken advantage of Ashley’s struggles, with a market value that now exceeds Sports Direct’s.

Ashley is overseeing a review of working practices in the wake of reports in the U.K.’s Guardian newspaper, which sent undercover reporters to work at a central England warehouse. Representatives from Sports Direct called the reports “unfounded criticisms.”

Sports Direct isn’t the only British retailer in the crosshairs of lawmakers. U.K. opposition Labour Party leadership candidate Owen Smith this week called for an inquiry into working practices at Asos Plc, saying talks with unions left him concerned the retailer could be “the new Sports Direct.”

Sports Direct has also had a fruitless two-year search for a non-executive director to replace the former Irish government minister Charles McCreevy. In its annual report, the company said it’s looking for a female applicant, so that women comprise 25 percent of its board, which is chaired by 74-year-old former policeman Keith Hellawell.

The battering that Sports Direct’s reputation has taken this year means the retailer will have difficulty finding people willing to sit on its board, according to James Hyde, director of U.K. executive search firm Flint Hyde.

“It’s just not seen as a company where you can further your career,” Hyde said.

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