Christmas Comes Early for Sports Direct’s Ashley With New Jetby
Embattled U.K. retailer to take delivery of $51 million plane
Shares drop as co. trims profit forecast and suspends buyback
It’s been a tough year for Mike Ashley, the embattled billionaire owner of U.K. retailer Sports Direct International Plc, as he’s grappled with disgruntled investors, sagging shares and public outrage over its working conditions. His response: a new $51 million corporate jet for Christmas.
The plane will be delivered in coming weeks and will “facilitate efficiencies relating to the use of management time and the pursuit of the group’s strategic priorities,” Sports Direct said Thursday as it also cut its profit forecast and suspended a share buyback. Ashley and senior managers already use a helicopter and a fleet of corporate vehicles to hop between stores and offices.
Companies around the globe have looked to ground pricey aircraft as they’ve become an emblem of corporate largesse. Embattled automaker Volkswagen AG got rid of its Airbus A319 to rein in costs in the wake of its emissions cheating scandal, while travel operator TUI AG ditched its Challenger 604 corporate jet. Tesco Plc chief Dave Lewis sold the British grocer’s fleet of five corporate jets, and HJ Heinz ditched its own soon after Jorge Paulo Lemann’s 3G Capital took over the U.S. ketchup king.
“Sports Direct is one of a small minority of companies that appear to be doing British business reputational damage,” said Oliver Parry, head of corporate governance at the Institute of Directors. “It all comes down to corporate excess -- that’s things like buying corporate jets.”
Sports Direct risked further irking governance watchdogs Thursday by announcing an agreement with a separate company controlled by Ashley. Double Take Ltd., where Ashley’s daughter Matilda is a director, will grant the retailer exclusive licensing rights to the Sport FX cosmetics brand. The company is still under investigation by regulators for failing to disclose a relationship with a company owned by Ashley’s brother.
The disclosures raise further questions over the running of Sports Direct, which reported a 57 percent decline in first-half earnings and trimmed its recently reduced annual forecast. Ashley, the company’s majority shareholder, has “no current intention” of taking the business private, Sports Direct said in the results statement. The shares fell as much as 12 percent in London and have lost half their value this year.
Sports Direct’s plane, like its helicopter, will be available for charter by third parties or staff in a personal capacity at times they are not being used by the company.
After a year in which Ashley was accused by lawmakers of presiding over appalling working conditions in the company’s warehouse, the billionaire said his main priority is looking after Sports Direct’s tens of thousands of workers.
“What matters most to me is how tough the last year has been for the people who work at Sports Direct,” Ashley said. “Our people have once again found themselves in the spotlight through no fault of their own, yet they remain hardworking and loyal. It is for this reason that my immediate priority will be to protect the people at Sports Direct.”
In the wake of the jet purchase, that sentiment rang hollow to some.
“The tone of Sports Direct’s first half results is conciliatory to its staff, describing them as its number one priority,” George Salmon, an analyst at Hargreaves Lansdown, said by e-mail. “However, the availability of the group’s new $50 million corporate plane for staff hire is probably of little interest to the vast majority.”
Other details from the retailer’s first-half results statement:
- Underlying pretax profit fell to 71.6 million pounds ($91 million) due to higher costs resulting from the retailer’s failure to hedge against sterling’s plunge
- Earnings for the year will likely to be at the bottom of the 265 million pounds to 285 million pound range given when Sports Direct cut its guidance two months ago
- The retailer appointed former investment banker David Brayshaw as a non-executive director
- The company suspended its buyback, without providing a reason