More than £400m wiped off retailer’s value as investor says corporate governance concerns could drive shares down further

More than £400m was wiped off the value of Sports Direct as City investors and MPs turned on the company following disappointing financial results and revelations over pay and working conditions unearthed by a Guardian investigation.

Shares in the UK’s biggest sportswear retailer slumped by 11% on Thursday, costing the company’s billionaire founder, Mike Ashley, some £237m.

The Guardian revealed on Wednesday how the retailer’s temporary warehouse workers are subjected to an extraordinary regime of searches and surveillance. Undercover reporters also came up with evidence that thousands of workers were receiving effective hourly rates of pay below the minimum wage.



Revealed: how Sports Direct effectively pays below minimum wage Read more

The company was branded a “scar on British business” by the Institute of Directors, was rounded on by its own shareholders and opposition MPs demanded that the FTSE 100 company be investigated by HMRC.

The revelations, coupled with a worse-than-expected sales performance over recent months, prompted the worst day’s trading for Sports Direct shares for nearly two years.

On Thursday, the Guardian also lay bare some of the pricing policies employed by the retailer and the crisis of corporate governance at the firm, which has been widely criticised for conditions in its warehouse where workers are warned they will be sacked if they receive six black marks – or “strikes” – over a six-month period. Strike offences include a “period of reported sickness”; “errors”; “excessive/long toilet breaks”; “time-wasting”; “excessive chatting”; “horseplay”; and “using a mobile phone in the warehouse”.

A string of normally guarded City figures emerged to criticise the company’s business practices as a result of the Guardian’s revelations. Shadow ministers and local Labour MPs pledged to write to HM Revenue & Customs to demand an investigation into whether the company was adhering to national minimum wage legislation.

Facebook Twitter Pinterest John McDonnell said if the allegations of breaches of the national minimum wage were true, it should set ‘alarm bells off at HMRC’. Photograph: Martin Godwin/The Guardian

Simon Walker, director general of the Institute of Directors, said: “Unfortunately, the actions of Sports Direct will leave a scar on British business. IoD members share the public’s outrage. At a time when the reputation of corporate Britain is on shaky foundations, another scandal is hard to stomach for the overwhelming majority of businesses that have integrity at their core.

“I urge people to remember that Sports Direct is categorically not a representative of British business, and those who believe passionately that successful economies live and die by the strength of the private sector, must point the finger when companies step out of line.”

Sports Direct’s own investors joined the attack. One leading shareholder, who did not want to be named, said: “Sadly we have come to expect this sort of problem at the company. Shareholders have met with the company to discuss whether everybody is employed properly and that the company lives by the rules, among other things. We have heard undertakings from management but I’m not sure we can have a great deal of confidence in them.”

Another top shareholder said investors were becoming increasingly restless because the company’s behaviour and reputation were affecting the share price and financial results were weaker. “You can’t ignore this behaviour because it will come back to bite you. If you’re not looking after your staff it will hit the share price in the end. Now we’ve got a tranche of issues coming through that people didn’t see or didn’t think were important but when the bottom line starts moving it becomes an issue of governance and of fund management.”

Sports Direct denies 'Dickensian practices' in face of investor revolt Read more

In Westminster, the shadow chancellor, John McDonnell, said: “If these allegations of breaches of the national minimum wage by Sports Direct are true, then it should be setting off alarm bells at HMRC. And I’d fully expect them to investigate and leave no stone unturned.”

McDonnell added: “There’s a basic responsibility that society expects from big business – to not exploit their customers, their staff or the taxpayer. There can be no idle response. To prevent large companies refusing to take their minimum wage responsibilities seriously, the government needs to increase the level of fines against recalcitrant employers.”



The shadow business secretary, Angela Eagle, said: “If there are allegations of non-payment of the national minimum wage, backed with evidence, these should be ruthlessly and forensically investigated by the authorities.”

Ian Austin, a former Labour minister and MP for Dudley North, said he had tabled a series of parliamentary questions to the chancellor and the secretary of state for business demanding an investigation into whether Sports Direct is paying the minimum wage.

Austin was also supported by Emily Thornberry, the shadow minister for employment, as well as local MPs Dennis Skinner and the shadow minister for electoral registration, Gloria de Piero, who all pledged to write to HMRC to ask for an investigation.

Ashley, whose fortune is estimated at £3.5bn, did not attend a presentation the company gave on its results to City analysts on Thursday morning, leaving the chief executive, Dave Forsey, to answer questions on the group’s half-yearly performance.



Facebook Twitter Pinterest Sports Direct’s founder, Mike Ashley, did not attend a presentation the company gave on its results to City analysts. Photograph: JMP/Rex Shutterstock

Forsey said Sports Direct had produced “excellent results” in a tough market and denied that publicity around the group’s treatment of staff had affected sales or relationships with suppliers.

“We need to do a better job of getting our side of the story over. That’s what we’ll continue to do,” Forsey said. “We are more determined than ever to make sure we are a better business and have the welfare of our own permanent staff and casual staff in the forefront of our mind.”

The Guardian’s investigation team found that staff at Sports Direct’s warehouse are required to go through searches at the end of each shift, for which their time is unpaid, while they also suffer harsh deductions from their wage packets for clocking in for a shift just one minute late.

The rigorous searches of warehouse staff – who are asked to roll up trouser legs and show the top of underwear – illustrate how concerned management is about potential theft. The practice typically adds another hour and 15 minutes to the working week.

Asked if Sports Direct had been contacted by HMRC, which oversees investigations into the implementation of the minimum wage, Forsey said: “That’s not something we are willing to discuss with the Guardian.”

The company said that the waiting time during the searches at its warehouse had been reduced. “A number of issues were raised by shareholders at our AGM, which we have addressed, for example the inconvenience experienced by some warehouse workers from the logistics of the security process when exiting the warehouse. Following a review, the process has been streamlined, which has led to a reduction in waiting time,” the statement said.



Forsey said “the potential bottleneck has been addressed”.

Casual workers were an integral component of the workforce, the retailer said. “To be clear, no warehouse workers are on zero-hour contracts, all have contracted hours with the agencies. In retail, casual workers find the flexibility offered by these arrangements very useful. We comply fully with all applicable legal requirements and will continue to keep these under review.”