Life is hard for retailers. But Sports Direct is in a crisis of Ashley’s own making


Mike Ashley leaving Sports Direct’s HQ after his results statement on Friday.
 Mike Ashley leaving Sports Direct’s HQ after his results statement on Friday.
Photograph: Kirsty O’Connor/PA

Even by Mike Ashley’s standards, Sport’s Direct’s annual results statement on Friday was an extraordinary performance. The idiosyncratic billionaire’s comments included expressing regret about buying House of Fraser last year due to its “terminal” problems; urging the City regulator to offer voluntary drugs tests to the chief executives of listed businesses; revealing that none of the big four auditors are able or willing to work with Sports Direct; and railing at length over the circumstances of his company’s failed bid for control of Debenhams. Oh, and there will be no profit guidance for next year.


The coup de grace, the show-stopper, came at the end: an unresolved €674m (£605m) tax bill from the Belgian authorities. The final paragraph of the results came out of the blue and will almost certainly trigger a punitive response from investors on Monday and, in the medium term, an attempt to punish the company’s board.

Sports Direct said it would address the tax issue but Chris Wootton, the deputy finance director, acknowledged that Grant Thornton, Sports Direct’s auditor, needed convincing. Given the tax bill arrived 24 hours before the results were published, this asks questions of the power dynamic between Grant Thornton and Sports Direct. How convinced were they that the Belgian taxman – wielding a bill that represents several years’ worth of group profits – didn’t pose a material threat to the group?

Ashley owns 62% of the business and the 38% rump of minority shareholders will want to know whether chairman David Daly and his non-executive directors saw the tax bill coming. Indeed, they might request that an independent adviser hover over Ashley’s laptop the next time he bashes out a statement.

Friday’s performance showed a retail group in trouble. It has bought too many businesses (Evans Cycles,, Game Digital and House of Fraser have been acquired since 2018), it is struggling to keep some brands onside, and it is losing key executives at too fast a rate. Karen Byers, an important lieutenant, quit this month

 and, on Friday, Sports Direct announced the departure of its finance director. As the sprawling statement showed, now is not the time for Ashley to be losing experienced senior managers.

Friday’s farce was quintessential Ashley – compelling, wilful, excruciating – but it was neither typical nor becoming of a listed business, and that points to where the future might lie for Sports Direct’s founder and chief executive.

Despite his protestations to the contrary last week, Ashley must be considering taking the business private and probably has the liquidity and financial contacts to make it happen. A business that was worth more than 800p a share at its peak in 2014 is worth 230p, or £1.2bn, now. It is also likely to be cheaper by the end of this week.

Even if Sports Direct disappears from publicly listed life, the business remains a matter of national importance. House of Fraser, which accounts for at least 10,000 jobs on the British high street, should not be allowed to fail and at some point an ailing retail name will have to become a test of government resolve to help the industry.

The department store’s problems are shared by healthier businesses: stifling business rates, a benign tax environment for online rivals, and the lack of a properly funded government retail strategy. House of Fraser’s predicament is serious and will almost certainly become a test of the government’s ability to do something constructive about the state of the high street amid Brexit. Last week, the CBI said Britain’s retailers had recorded the longest period of falling sales for almost eight years, while at least 75,000 retail jobs have been lost since last year. Action is needed.

Nonetheless, Ashley should not be spared judgment. Sports Direct’s misery is entirely self-made, due to an unrestrained chief executive whose ambition and belief in his own abilities as a retailer have got the better of him. Staff and shareholders will now pay the price.

The Cobham sale shows crashing out could spark a buyout frenzy

Last week’s £4bn agreed deal to sell Cobham to US private equity firm Advent International could be a sign of things to come for British companies.

Private equity firms raise cash from investors and buy companies that appear undervalued, using lots of debt. They then cut costs and, sometimes, make improvements before offloading the business, either in chunks or in one piece – often back to the shareholders who sold in the first place.

The firms, once vilified as asset-stripping marauders, slipped out of view after the financial crisis. But, armed with a record $2.5tn (£2tn) of funds and able to tap abundant cheap debt, they are on the march again. The value of buyouts reached a record $256bn in the first half of this year.

Britain has slipped down the list of countries for acquisition targets as Brexit has clouded companies’ prospects. But there is a price for any risk and we may have reached that level.

The pound has fallen by about 17% against the dollar since the referendum, making UK companies relatively cheap for US buyers. The UK government also tends not to get involved in takeovers, reducing the hassle and risks found in other countries.

After the vote, Advent continued buying up UK industrial companies such as Laird and Brammer. The £4bn price for Cobham is its biggest bet on the UK and it has $17.5bn of funds waiting for deals. Other outfits are also taking the plunge: Blackstone, the world’s biggest private equity firm, is one of three investors buying Merlin Entertainments, the owner of Madame Tussauds.

If the pound collapses after a no-deal Brexit, UK firms will become even cheaper for buyers should they have the stomach for it.

A buyout frenzy would raise questions for the new government. Will it seek favour with the US and preside over anything-goes capitalism? Or does it come under pressure to live up to its nationalist rhetoric and intervene?

Just what Britain didn’t need – a Trump-led global slowdown

Ever since Donald Trump kicked off a trade war last year, the stability of the world economy has looked in jeopardy. Import and export activity has slumped, and with it global economic growth. Business confidence has evaporated and investment frozen.

This week, the US Federal Reserve will be tasked with picking up the pieces, and international markets are braced for the central bank to cut borrowing costs to support growth at home and abroad. Without such a step, the whole apple cart of the world economy could tumble.

City economists expect the Fed to cut interest rates by a quarter of a point on 31 July, to between 2% and 2.25%, marking the first reduction in borrowing costs in a decade.

Central banks elsewhere have been backed into a corner by Trump’s bullying tactics. The president’s trade wars are having a chilling effect on the European economy, where manufacturers reliant on healthy export volumes are in the doldrums. The European Central Bank dropped the broadest hint yet last week that it would join the Fed by cutting interest rates to support faltering economic activity.

Presented with the unique challenge of Brexit alongside this slowdown, the Bank of England, too, looks more likely to cut rates than it might have done earlier this year. Threadneedle Street is expected to leave interest rates unchanged at 0.75% until the outcome of Brexit has been determined. Crashing out without a deal this autumn would almost certainly see a cut in borrowing costs. Weaker global growth just as Britain severs itself from the EU, its biggest trading partner, would confirm such a prescription.

ICC Men’s Cricket World Cup, Durham
Sri Lanka 338-6 (50 overs): Fernando 104, Holder 2-59
West Indies 315-9 (50 overs): Pooran 118, Malinga 3-55
Sri Lanka won by 23 runs

Jason Roy and Jonny Bairstow shake hands in the middle while batting for England

Slightly built, Fernando favoured precise strokeplay over power in the mould of Sri Lanka legend Mahela Jayawardene, but he was still able to dispatch Sheldon Cottrell for two sixes into the leg side, one measured at 83 metres.

The Windies were guilty of five no-balls, the highest in an innings at this tournament and it was a mammoth overstep from Oshane Thomas that allowed Lahiru Thirimanne a reprieve after he clipped straight to mid-wicket.

Thirimanne advanced down the wicket to thump successive boundaries in the next over as the Sri Lanka middle order all contributed to an impressive total – their previous highest in the competition had been 247 in an 87-run defeat by Australia at The Oval.

However, after Malinga struck twice in his opening three overs, it was the brilliance of Pooran that looked set to rescue the mercurial Windies, who had Barbadian pop star Rihanna cheering them on enthusiastically from the stands.

Pooran, the stylish Trinidadian left-hander, reached his fifty with a six, and with Allen also striking the ball cleanly for his maiden half-century, West Indies looked favourites as Sri Lanka’s attack began to wilt and show a lack of depth.

But the pivotal moment came when Mathews, in his first one-day international spell for 561 days, lured Pooran into a full-blooded cut that, for once, was not struck sweetly and the ball was gleefully pouched behind the stumps.

Sri Lanka will surely rue two washed-out matches earlier in the tournament, because even if they beat India in their final match and reach 10 points, they would not go through as other teams have more wins.

World Cup group table
Rank Team P W L T NR RR Pts
1 Australia (Q) 8 7 1 0 0 1 14
2 India 7 5 1 0 1 0.854 11
3 New Zealand 8 5 2 0 1 0.572 11
4 England 8 5 3 0 0 1 10
5 Pakistan 8 4 3 0 1 -0.792 9
6 Sri Lanka 8 3 3 0 2 -0.934 8
7 Bangladesh 7 3 3 0 2 -0.133 7
8 South Africa 8 2 5 0 1 -0.08 5
9 West Indies 8 1 6 0 1 -0.335 3
10 Afghanistan 8 0 8 0 0 -1.418 0

‘Angelo put his hands up’

Sri Lanka captain Sri Lanka captain Dimuth Karunaratne: “To win any match is a great feeling. It gives us lots of confidence. All of the players are doing really well. That is what I was expecting as a captain.

“Angelo put his hands up and said: ‘OK I will bowl two overs.’ He has that confidence. He did the job. I don’t think he is going to bowl much more, but if it is a crucial time he might bowl a couple of overs.”

West Indies skipper Jason Holder: “We started slowly out of the blocks; we gave up a lot of runs in the field and that really hurts you. We were sloppy. We have to be better. This entire tournament we have let key moments slip.

“I felt 338 was about par, it was free-scoring. It was a matter of us getting in and playing some shots. Pooran had an outstanding knock. He gave himself a chance and went deep. The run-outs were crucial. We were one or two partnerships away.”

John Flint: HSBC chief executive out in top-level reshuffle

John Flint

John Flint is giving up the role he has held for a year-and-a-half “by mutual agreement with the board”.

He will immediately cease his day-to-day responsibilities at HSBC, but will help with the transition as Noel Quinn takes over as interim chief executive.

Chairman Mark Tucker thanked Mr Flint for his “commitment” and “dedication”.

However, he said: “In the increasingly complex and challenging global environment in which the bank operates, the board believes a change is needed to meet the challenges that we face and to capture the very significant opportunities before us.”

HSBC made the surprise announcement as it reported a 15.8% rise in pre-tax profit to $12.4bn (£10.2bn) for the six months to 30 June.

Mr Flint, who has worked at HSBC for 30 years, said: “I have agreed with the board that today’s good interim results indicate that this is the right time for change, both for me and the bank.”

The 51-year-old ran the bank’s retail and wealth management business before taking over as chief executive last year. At that time, Mr Flint was seen as a safe choice for the top job.

HSBC portrays itself as a conservative bank. Unlike some rivals, it has never pursued the wilder excesses of investment banking, and has a proud record of appointing its chief executive and chairman from within. It is part of the establishment in Asia and the West, and makes its money from the giant trade flows between.

With a 30-year track record at the bank, John Flint appeared the safest of hands when appointed 18 months ago. The bank’s shares have fallen during his tenure, but the increasing trade tensions between America and China explain most of the fall. Mr Flint will be a “good leaver” – meaning he keeps his entitlement to most of his share options – and which rules out any idea his departure is linked to misconduct.

Mr Flint was regarded as the favourite of his predecessor as chief executive, Stuart Gulliver – so it is possible that Mark Tucker, HSBC’s chairman, has simply decided he wants his own man in the job.

But the Huawei connection, although not confirmed by HSBC, cannot be discounted. In seeking to keep in the good books of the US authorities – which had a monitor embedded at the bank – HSBC provided the information that allowed America to apply for the extradition of Meng Wanzhou, Huawei’s chief financial officer. That cannot have pleased Beijing, and HSBC is reliant on China’s goodwill as much as America’s. Mr Flint may have been the necessary sacrifice.

Presentational grey line

Commenting on the current environment, HSBC said “the outlook has changed”.

It said that US interest rates were now expected to fall rather than rise and “geopolitical issues could impact a significant number of our major markets”.

It added: “In the near term, the nature and impact of the UK’s departure from the European Union remain highly uncertain.”

‘Good leaver’

Mr Flint has a 12-month notice period, but it is not clear when his departure date will be, because he has “agreed to remain available to HSBC”.

HSBC has also granted Mr Flint “good leaver” status, which means he will be entitled to any stock options that vest after he exits the bank, provided he does not work at a competitor for two years.

The bank said it has begun a search to find a new chief executive and “will be considering internal and external candidates”.

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