There’s a saying in football that when players stop performing and the team falls into a downward spiral, the manager has ‘lost the dressing room’.
It’s a gloomy cliché with which Sports Direct boss Mike Ashley – owner of football clubs Newcastle United and Rangers – will be pretty familiar.
But the recent performance of the business Ashley founded, combined with the billionaire’s alleged off-field conduct that has been central to a courtroom row, mean he is in very serious danger of losing Sports Direct’s City dressing room of investors.
The retailer’s long-suffering shareholders are already voicing their dissent.
Having seen the Sports Direct share price plummet from a high of 922p in April 2014 to 295p in a little over three years, it’s not difficult to understand why.
The fact that allegations over Ashley reneging on a verbal £15m promise to banker Jeff Blue, drinking “to get drunk” and vomiting into pub fireplaces had no impact on the Sports Direct share price tells its own story.
Surely, for any other FTSE 250 chief executive, such revelations would have earned them their P45.
But Sports Direct’s reputation has already been so bruised by accusations over working conditions at its Shirebrook warehouse and its use of zero-hour contracts that Ashley’s latest alleged antics have barely impacted Joe Public’s perception of the brand.
Amid struggles to repair that tarnished image, financial performance has also suffered. Underlying pre-tax profit slumped 57% to £71.6m at the half-year stage, while this week’s preliminary results aren’t expected to paint a much prettier picture.
Managerial pressure
All of which has left the City wondering whether Ashley is the right man to change tactics and rebuild Sports Direct’s languishing share price.
Ashley himself has described Sports Direct’s float as an “unmitigated disaster” – besides the fact it netted him a cool £921m, of course.
“As City hedge fund veteran Crispin Odey flagged: ‘The bit we don’t understand is who is in the boardroom to help him and give him good guidance?’”
The maverick founder, who still owns two-thirds of the company’s shares, even went so far as to say he would rather “put needles in my eye” than meet with investment bankers – not exactly the ideal attitude for the boss of a listed business.
So could now be the ideal time for Ashley to draft in a new manager or, at the very least, an experienced right-hand man?
The tycoon took the Sports Direct reins last September following Dave Forsey’s resignation as chief executive, but has found the going tough – particularly at a time when high-street rival JD Sports is celebrating goal after goal.
As City hedge fund veteran Crispin Odey flagged: “The bit we don’t understand is who is in the boardroom to help him and give him good guidance?”
Making some substitutions within his leadership team could prove a crucial first step if Ashley is to get investors back onside.
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