Sports Di­rect share­hold­ers urge fair play as the Ash­ley roller­coaster con­tin­ues

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le­gal­i­sa­tion of broth­els and draw­ing con­fes­sions out of the York­shire Rip­per, Peter Sut­cliffe. His time as Tony Blair’s drug tsar ended in a row over the weak­en­ing of mar­i­juana’s clas­si­fi­ca­tion. How­ever, while he has spent the past 40 years in pub­lic life, his seven years at Sports Di­rect have been some of his most un­com­fort­able.

Last week he barely sur­vived an­other share­holder re­volt with 47pc of in­de­pen­dent in­vestors vot­ing against his re-elec­tion. Af­ter two pre­vi­ous re­bel­lions against him, where he was only saved by Ash­ley’s con­trol­ling stake, he had promised to step down if the ma­jor­ity of in­de­pen­dents re­belled once more.

How­ever, this time he clinched sup­port from 53.2pc of in­de­pen­dent share­hold­ers. “He got away with it,” was how one share­holder char­ac­terised the nar­row vote.

Even af­ter poll re­sults de­clared that he had es­caped a top­pling, Hellawell re­fused to make any com­ments about his fu­ture at Sports Di­rect. That didn’t stop his de­trac­tors from ques­tion­ing whether he was a suf­fi­cient check on Ash­ley’s con­trol­ling in­flu­ence at the com­pany. “It is clear that the re­elec­tion of Keith Hellawell is far from a ring­ing en­dorse­ment,” said Paul Lee, head of cor­po­rate gov­er­nance at Aberdeen Stan­dard In­vest­ments. “The com­pany hasn’t made good on its pre­vi­ous prom­ises and we do not yet have con­fi­dence that the chair­man and board are hold­ing the chief ex­ec­u­tive to ac­count in the way that they should.” When Hellawell was asked two years ago whether he could keep the ty­coon in check, he said: “As a po­lice­man I’ve con­trolled peo­ple from se­rial killers to rapists and Mike Ash­ley doesn’t need con­trol­ling.” Mean­while, Ash­ley, who jok­ingly calls the for­mer po­lice­man “Plod”, has said of Hellawell: “He knows my strengths, he knows my weak­nesses.”

While Aberdeen Stan­dard In­vest­ments, Royal Lon­don, Fidelity, Le­gal & Gen­eral and Her­mes voted against Hellawell, their op­po­si­tion was di­luted by Stan­dard Life, one of his fiercest crit­ics, hav­ing sold its 6pc stake in the past year. That mar­gin could have boosted the rebels’ cause.

The ef­fort to re­move Hellawell was also lack­ing in­flu­en­tial sup­port from the In­vestor Fo­rum – the body specif­i­cally set up to push re­cal­ci­trant com­pa­nies into bet­ter be­hav­iour. The In­vestor Fo­rum had cam­paigned vig­or­ously last year for “an in­de­pen­dent re­view of the com­pany’s en­tire cor­po­rate gov­er­nance frame­work”. It even added that, if di­rec­tors were un­will­ing to im­ple­ment the re­view, “se­ri­ous ques­tions will be raised as to whether they truly rep­re­sent the in­ter­ests of all share­hold­ers and, there­fore, whether they are meet­ing their statu­tory di­rec­tor du­ties”. But since that feisty mes­sage there has been deaf­en­ing si­lence from the In­vestor Fo­rum, de­spite Sports Di­rect reneg­ing on its prom­ise of an in­de­pen­dent re­view.

To­mor­row

De­spite its ini­tial best ef­forts, the fo­rum has proved to be just an­other tooth­less body.

Sports Di­rect claimed an in­de­pen­dent re­view was ditched be­cause of two po­ten­tials turn­ing down the chair­man post. In­stead it hired law firm RPC, which the fo­rum had al­ready pub­licly said it did not be­lieve was in­de­pen­dent due to its long-stand­ing re­la­tion­ship with Sports Di­rect and Ash­ley.

Last week Hellawell said that the cor­po­rate gov­er­nance re­view was “on­go­ing” and had raised five ar­eas of con­cern, with­out de­tail­ing what they were. This was hardly the “very open” ethos that Sports Di­rect had promised in its 2016 pre­sen­ta­tion to in­vestors.

Last year Sports Di­rect threw the doors open to its an­nual meet­ing and took the un­usual step of em­ploy­ing Eventbrite, a tick­et­ing com­pany nor­mally em­ployed by music fes­ti­vals, to en­cour­age droves of in­ter­ested pun­dits to make the trip to Shire­brook. As well as a tour around the vast Shire­brook ware­house led by Ash­ley, the com­pany is­sued a bold pre­sen­ta­tion that promised “time for change”. It was an ex­plicit ef­fort to draw a line un­der a scan­dal-rid­den pe­riod. This year, there were fewer than 15 in­vestors in at­ten­dance, no open day and no Ash­ley. The train­ers and track­suits ty­coon said he had other business com­mit­ments that meant he couldn’t at­tend the once-ayear event with the fel­low own­ers of the com­pany. “He’s given up with rapidly el­e­vate Sports Di­rect’s cus­tomers and prod­ucts af­ter miss­ing out on the boom­ing ath­leisurewear trend.

The com­pany splashed out more than £300m last year on prop­erty as part of its strat­egy to im­prove re­la­tion­ships with brands like Nike and adi­das. Sports Di­rect now has 25 “new gen­er­a­tion stores”, of which 13 are deemed to be “flag­ship” wor­thy. Ash­ley reck­ons this num­ber can grow to between 75 and 160 over the next five to 10 years.

How­ever, while the 25 new gen­er­a­tion stores have been beat­ing ex­pec­ta­tions, they are in the mi­nor­ity as Sports Di­rect’s re­tail es­tate of 232 shops con­tin­ues to be lit­tered with tired, old stores. “The job is still very far from done but the early signs from Sports Di­rect’s flag­ship stores are visually very pos­i­tive,” says Jonathan Pritchard, an an­a­lyst at Peel Hunt. How­ever, for Pritchard the key test will be whether Sports Di­rect can con­vince “qual­ity branded prod­ucts [to re­turn to] the non-flag­ship stores, and that will take a while to re-emerge as Sports Di­rect has yet to be fully al­lowed off the man­u­fac­tur­ers’ naughty step”.

Ash­ley’s at­tempt to turn Sports Di­rect into Sel­fridges has also been the driv­ing force be­hind his scat­ter­gun ac­qui­si­tion spree. The ty­coon has used var­i­ous means to ac­quire up­mar­ket lin­gerie firm Agent Provo­ca­teur, and stakes in French Con­nec­tion, Game Dig­i­tal, Deben­hams, Goals Soc­cer, and US re­tail­ers Fin­ish Line and Dick’s Sport­ing Goods. How­ever, re­cent ef­forts to take full own­er­ship of de­signer re­tail chain Flan­nels are the most ex­plicit demon­stra­tion of his am­bi­tion to move up­mar­ket. His daugh­ter Matilda’s make-up business, Sportfx, is al­ready stocked in Sports Di­rect shops but could be rolled out across Flan­nels shops in an at­tempt to recre­ate Sel­fridges’ renowned beauty halls.

Af­ter all, Ash­ley knows that the best way to si­lence dis­sent­ing in­vestors is to turn sales and prof­its around.

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