Sports Direct’s problem with disappearing staff

Mike Ashley, the British billionaire behind embattled retailer Sports Direct International and Heatons in Ireland, has grappled with declining growth, a plunging share price and a parliamentary grilling this year. Now he's got another problem: disappearing employees.Turnover among Sports Direct's salaried UK staff rose by more than three percentage points last year to 22 per cent, the company disclosed in its annual report.

That's almost three times the average rate of UK employers, according to a 2015 survey by the Chartered Institute of Personnel and Development.

“An increase of turnover of that magnitude is incredibly worrying,” said Bryan Roberts, a retail analyst at consultancy TCC Global.

“Below senior level at Sports Direct it’s hard to achieve any sort of discernible benefits above and beyond your hourly wage.”

‘Appalling’ work practices

The staff exodus will heap pressure on founder and deputy chairman Mr Ashley, who has spent more than two years trying to fill the vacant role of finance director and was admonished by UK MPs in July for presiding over “appalling” labour practices in Sports Direct’s warehouses.

About 80 per cent of the retailer’s workforce is employed on so-called “zero-hours” contracts, which give no set guarantee of work. The turnover figure excludes those employees. A Sports Direct spokesperson didn’t respond to a request for comment about the increase in staff turnover.

The criticisms have added to investors' long-standing concerns over corporate governance. Bob Mellors, the company's last permanent chief financial officer, retired in December 2013. Sports Direct failed to fill the post for 18 months before appointing company veteran Matt Pearson in an interim capacity, a role that he has now been performing for more than a year.

“Sports Direct’s continued inaction in filling this post is a clear corporate governance red flag for us as investors,” said Mike Fox, head of sustainable investments at Royal London Asset Management, which owns 0.18 per cent of the shares. “The interim situation is inappropriate for a company of this size.”

Wallet hit

Mr Ashley’s wallet has been hit as well as his reputation. After three profit warnings, shares in the UK’s largest sporting-goods retailer and operator of 27 stores in the Republic and 15 in the North have lost almost half their value this year. Mr Ashley’s net worth has plunged 58 per cent to £2.51 billion (€2.9 billion) in that time, according to the Bloomberg Billionaire’s Index.

Sports Direct employs 22,618 people in the UK, according to its annual report, a figure that excludes those who work for hourly wages. The increasing staff flux will bring disruption and increased costs at a time of “considerable” upheaval, TCC’s Mr Roberts said.

Rival retailer JD Sports Fashion has taken advantage of Mr Ashley's struggles, with a market value that now exceeds that of Sports Direct. Mr Ashley is overseeing a review of working practices in the wake of reports in the Guardian newspaper, which sent undercover reporters to work at a central England warehouse. Representatives from Sports Direct called the reports "unfounded criticisms".

Sports Direct isn't the only British retailer in the crosshairs of MPs. UK Labour Party leadership candidate Owen Smith this week called for an inquiry into working practices at Asos, saying talks with unions left him concerned the retailer could be "the new Sports Direct."

Charlie McCreevy

Sports Direct has also had a fruitless two-year search for a non-executive director to replace the former Irish government minister Charlie McCreevy.

In its annual report, the company said it is looking for a female applicant, so that women comprise 25 per cent of its board, which is chaired by 74-year-old former policeman Keith Hellawell.

The battering that Sports Direct’s reputation has taken this year means the retailer will have difficulty finding people willing to sit on its board, according to James Hyde, director of UK executive search firm Flint Hyde. “It’s just not seen as a company where you can further your career,” he said.

– Bloomberg