Sports Direct leaps on £900m buy-back plan
Move sends shares up 9pc days after MPs criticised retailer for ‘appalling’ conditions’ at warehouse
SPORTS Direct shares soared 9pc yesterday after the company unveiled plans for a £900m share buy-back.
The sportswear retailer’s shares ended the day 23.6p higher at 281.1p as Sports Direct said it would buy back around 5pc of the company’s stock between now and its AGM in September. The move comes just days after a damn- ing report by MPs into Sports Direct’s workplace practices, which concluded that founder Mike Ashley turned a blind eye to “appalling conditions” at the retailer.
Despite Mr Ashley telling a Commons committee that the company had “outgrown him” and that he could “not be responsible for everything” that happened at Sports Direct, senior MPs decided that he “must be held accountable”.
Mr Ashley had previously complained that the negative publicity surrounding Sports Direct’s Shirebrook warehouse had hurt sales.
Sports Direct posted a 8.4pc slide in underlying pre-tax profits to £275.2m earlier this month while like-for-like sales dipped by 0.8pc – a stark comparison to the year before when the sportswear chain posted 7.4pc sales growth.
The crash in the share price, largely caused by the scandal surrounding Mr Ashley, has caused the company to tumble out of the blue-chip index and into the FTSE 250.
Sports Direct’s shares were also punished after the EU referendum result when the retailer admitted that it had not put currency hedging in place and so profits would be hurt by the significant weakening of the pound.
The company has also missed out on acquisition opportunities, including Debenhams’ Irish business and a joint bid for US retail chain Sports Authority.
However, its hostile stake-building in catalogue and online retailer Findel appears to be paying off as Mr Ashley has gained backing from institutional shareholders Schroders and Toscafund to be made chairman.
Mr Ashley sought to quell specula- tion last month that he would take advantage of the company’s depressed share price by taking Sports Direct private.
Sports Direct’s share reaction to the buy-back will add around £125m to the value of his 55pc stake in the company.
Sports Direct had hinted at the time of its full-year results that it was considering a buy-back while the shares were depressed.
Meanwhile, the company’s arch-rival, JD Sports, said that full-year profits would be at the upper end of expectations, between £170m and £190m, after strong trading.
JD Sports sales have benefited from an exclusive replica kit contract with the Welsh football team, which had unexpected success at Euro 2016.
“The momentum continues at JD Sports, with not a flicker from Brexit and the boosts from Euro 16 and Eid now both in the bag,” said Jonathan Pritchard, analyst at Peel Hunt.
“The tailwinds from people spending more time exercising, and the fashionability of trainers continue. There will come a time when the cool kids decide to move on from wearing sneakers morning, noon and night, but the athleisure trend is, if anything, speeding up and we are very confident that the next generation of shoppers will continue this,” said Mr Pritchard.