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.