Financial Trading Blog
Stock of the day 06/09/2016 – Sports Direct International PLC
The last 12 months have not been kind to Sports Direct, even if most of its problems have been self-generated. Back in December 2015 the stock lost more than 20% in value as The Guardian revealed working conditions that often led to employees receiving less than minimum wage, a decline that only intensified at the start of 2016 as the company issued a post-Christmas profit warning. That left the stock trading below the £4.50 mark, a level it struggled to break as Mike Ashley was hauled in front of MPs to discuss his companies many infractions.
Terrifying all of this was pre-Brexit, with the referendum result eventually sending Sports Direct to a more than 4 year nadir of £2.52. The company’s full year figures at the start of July were no help, with the company posting 8.4% plunge in underlying pre-tax profit to £275.2 million. In a bit of a hail Mary Ashley then announced details of a £90 million share buyback plan at the end of July, something that did admittedly help turn things around for the beleaguered stock, sparking a recovery that, alongside the decision to drop zero hour contracts, has left Sports Direct at a current trading price of £3.51 (IT-Finance.com, 05/09/2016).
That rise may all come to an end on Wednesday, however, as Sports Direct heads into an AGM with its investors baying for blood. Concerns surrounding the company’s labour practices and corporate governance, especially the role of controversial chairman Keith Hellawell and, of course, Mike Ashley himself, should lead to a fiery meeting mid-week, with many major shareholders stating in advance that they will vote against Hellawell’s reappointment. On top of all this RBC recently stated that Sports Direct, alongside Debenhams, would be one of the hardest hit retailers in the aftermath of the Brexit, yet another reason why investors will want better leadership in the coming months.
Sports Direct International PLC has a consensus rating of ‘Hold’ with an average target price of £8.25.
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