Sports Direct Shares Rise as Mike Ashley Faces Questioning

Sports Direct's Mike Ashley faced questions from MPs over working practices in his company and Burberry's CEO has suffered a 75% pay cut

Karen Kwok 7 June, 2016 | 4:14PM
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Sports Direct International (SPD) founder Mike Ashley today admitted his company had paid warehouse staff below the minimum wage “at some point” when he faced questions from British lawmakers over working practices.

Having answered questions during a hearing by the Business, Innovation & Skills Committee, Ashley said he hoped the issue of paying below minimum wages would have been addressed by the pay rise the company announced at the end of 2015.

Ashley agreed too many of Sports Direct’s workers were on zero-hours contracts, another criticism levelled at the company by the Committee. Explaining the use of agency workers over direct employees, Ashley said given the growth of the business, it would not haven been possible to take on all employees directly.

Last year the sports clothing and equipment retailer was reported to have poor working conditions at the Shirebrook warehouse in Derbyshire. Workers were reportedly too scared to take days off sick and investigations by the media showed that ambulances were called out to Sports Direct’s complex at Shirebrook in Derbyshire 76 times in two years. It was also reported that the company would dock workers 15 minutes’ pay if they were one minute late for their shift.

Today, Ashley said this was "unacceptable" and he "did not know" who implemented the 15-minute rule or when it was implemented.

Before meeting MPs this afternoon, Ashley published a letter, saying he had "identified a need for improvements to security procedures at Shirebrook" and that these had now been carried out. He added that some of the issues discovered in the company’s internal probe were an “unpleasant surprise”.

The letter also said Sports Direct’s chief executive Dave Forsey wold not take up his four-year share bonus, which would have been worth around £4 million.

Shares of Sports Directs were up 5.8% to 384.60p at the end of the day. However negative speculation over the company has sent shares down 34% year to date. Brokers forecast a “hold” view towards the company stock.

Burberry’s CEO Pay Cut

Another retailer Burberry Group (BRBY) also announced news regarding the company’s chief executive pay today. Designer and CEO Christopher Bailey agreed to a 75% pay cut as the luxury brand struggled to achieve promised growth.

According to Burberry’s annual report, Bailey’s dropped from £7.5 million to £1.9 million in the 2015/16 financial year.

Highly dependent on emerging market growth, especially in China, Burberry’s profits have been affected by the recent Chinese economic slowdown. Shares in the company have dropped 5.4% year to date, however Morningstar analysts see the stock as undervalued.

Morningstar analysts do not believe that Burberry is permanently damaged by the recent share price fall, as the brand recognition and brand investments distinguish it from peers.

The long-term opportunities for luxury brands in China remain, even if store growth is slowing, Morningstar analyst Paul Swinand explained. He estimated that China's increasingly wealthy middle class would grow from 500 million to approximately 900 million by the end of the decade.

Recent increases in dividends and increased investment in stores, both growth and refurbishing, have increased cash outflows, and Swinand believes Burberry will maintain its excellent balance sheet and will continue to pay a healthy dividend. The stock is rated as an undervalued stock by Morningstar analysts with a four-star rating. Shares of Burberry grew 2% to 1101p at the end of the trading day. 

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Burberry Group PLC1,035.50 GBX-1.47Rating
Frasers Group PLC829.50 GBX0.18

About Author

Karen Kwok

Karen Kwok  is a Reporter for

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