Mike Ashley ‘could afford to take Sports Direct private’

Sports Direct entitled its most recent annual report Everything is Changing. Mike Ashley, who started the retail business more than 30 years ago, should heed that advice and take the company private.

Investors have been prepared to put up with the Newcastle United owner’s foibles — among them taking stakes in competitors including Tesco and Debenhams — as long as the sporting goods retailer was performing.

Now it’s not. Revenue growth has slumped.

Yesterday, the company warned it won’t meet its full-year earnings target of £420m (€566m), blaming unseasonably warm weather and poor trading conditions.

Earnings may be as low as £380m, and investor scrutiny is only going to get more intense.

Sports Direct has already attracted ire over its unusual corporate governance arrangements, as well as a lucrative bonus plan that pays out millions to executives and employees.

Then there is inexorable rise of JD Sports. Unlike Sports Direct, which relies on a stable of lower-priced own brands, it is able to stock the most up-to-date styles from the big sportswear houses.

JD Sports’ pre-Christmas announcement that it expects full-year pre-tax profit to be £10m more than analyst estimates only makes Sports Direct’s performance look even worse.

The 40% decline in Sports Direct’s shares in the past three months has cut Ashley’s personal wealth to €3.6bn, according to the Bloomberg Billionaires Index.

But he already owns 55%, and buying out the rest is affordable. Sports Direct is getting almost as cheap as a pair of one of its own-brand trainers.

That’s a bargain that Ashley might find hard to resist.

Bloomberg