Facebook Pinterest Search Icon SourcingJournal_horiz Tumbler Twitter Shape photo-camera graph-trend Shape latest-news icon / user

Sports Direct Slumps as Retailer Delays Results on Auditing

Sports Direct International Plc shares headed toward a seven-year low after the U.K. sports-apparel retailer delayed publishing its results as auditors increase their scrutiny of its accounting.

The U.K. retailer said Monday it needs more time to compile information as regulators review Grant Thornton’s audit of its fiscal 2018 results, and that the review may affect its financial guidance. The shares fell as much as 14% in morning trading in London.

Sports Direct cited the complexity of integrating the House of Fraser department-store chain and “current uncertainty as to the future trading performance of this business.”

The delay adds to the list of corporate-governance questions that have plagued the company, controlled by billionaire founder Mike Ashley. Chairman Keith Hellawell resigned in December, following criticism that he failed to challenge management’s unorthodox style and put shareholder value at risk. A 2015 newspaper investigation uncovered substandard working conditions in a company warehouse, sparking the eventual resignations of a former CEO, the chief financial officer and a board member.

“House of Fraser is clearly a disaster area,” wrote Nick Bubb, an independent retail analyst. “This is a serious situation.”

Sports Direct said it plans to publish audited results between July 26 and Aug. 23 as it delays the preliminary results that had been scheduled for Thursday. The company bought House of Fraser last year after the department-store chain initiated insolvency procedures, in an attempt to turn around an anchor of the U.K.’s troubled shopping districts.

“Sports Direct would note that its core principles in regards to its financial statements are to be conservative, consistent and simple,” the company said, adding that a number of issues could materially affect the financial guidance it gave in December.

The statement and the recent exits of two senior executives, including Karen Byers, the head of retail, “could be highlighting issues in the core business, as well as House of Fraser,” wrote Graham Renwick, an analyst at Berenberg. “The lack of visibility and the high level of uncertainty raises the risk profile of Sports Direct even further.”

Ashley said in December business in the preceding month had been “unbelievably bad” and that full-year results would decline. Excluding House of Fraser, the company had forecast growth in underlying earnings before interest, taxes, depreciation and amortization of 5% to 15%.

The U.K.’s Financial Reporting Council has been probing the conduct of Grant Thornton and one of its employees after they failed to disclose a business relationship between Mike Ashley, who controls Sports Direct, and his brother.

—With assistance from Lisa Pham.

More from our brands