More than 2,000 shop floor staff at Sports Direct are set for a life-changing windfall after record profits at the fast-growing, cheap-and-cheerful chain triggered a bonus payout that will see workers who earn ?20,000 a year banking payouts of ?100,000 each.
While six-figure bonuses are usually reserved for executives, the UK's biggest sports retailer set up its bonus scheme back in 2009 for any full-time staff, from stockroom to the boardroom, who had worked for the company for a year and stayed for a further four. Since then the retailer's fortunes ? and its share price ? have been transformed and the workers have hit the jackpot.
The company's profits have soared 40% to more than ?200m in the past year, at a time when the high street has been struggling badly and even Tesco has been forced to scale back expansion plans.
But Sports Direct, set up 30 years ago by billionaire and Newcastle United owner Mike Ashley, has gone from strength to strength with its pile it high, sell it cheap business model.
The retailer, based near Mansfield, said the past year was boosted by the 2012 summer of sport ? the Olympics, Paralympics and Uefa Cup competition. The red, white and blue Sports Direct fascias are spreading rapidly. The retailer is now in 19 countries and has just signed a deal to open inside some of the biggest Tesco superstores, to take space the grocer no longer needs as its own shoppers buy more online.
As rivals have fallen, Sports Direct, which now sells more than one in every four pairs of trainers in the UK, has also snapped up failing brands including JJB Sports and fashion chains Republic, USC, Flannels and Cruise.
Sports Direct is now top of the list for administrators to call when trying to sell off failed businesses.
More than ?2bn went through the tills in the past year and the share price has risen to record highs, helping 48-year-old Ashley, who still owns nearly two-thirds of the business, build a fortune of some ?2.3bn. On Thursday Sports Direct's shares climbed a further 6% ? adding ?146m to the value of his stake. The retailer is near to joining the FTSE 100 index ? where it would rank alongside chains such as Marks & Spencer and Sainsbury's.
It was Ashley who devised the scheme to pay out the vast staff bonuses ? a scheme which makes John Lewis's much-praised partnership scheme seem miserly by comparison.
Four years ago all full-time staff who had been with the company since 2008 were promised free shares if profit targets were hit in 2009. When that target was hit they were handed a 25% bonus on their base salary, paid in shares worth ?1 each. Those shares soared in value, and when a first 25% tranche of free shares were awarded last year, someone earning ?20,000 a year almost doubled their take-home pay with shares worth ?17,500.
While impressive, that payout was a mere pittance compared with the huge windfall that follows Thursday's results. The same staff member earning ?20,000 will now get 12,000 shares worth a further ?75,000.
The lucky 2,000 are now free to sell the shares ? and Sports Direct has even provided a free stockbroking service to help them cash in.
Sports Direct's chief executive, Dave Forsey, a long-standing lieutenant of Ashley, said: "The share scheme glues this company together. These schemes are typically only for the executives, but this goes deep into the company. I'm surprised more businesses haven't adopted something like this sooner."
Ashley himself does not qualify for a payout ? but he did sell shares worth ?100m earlier this year, to add to the ?1bn he received when he floated the business on the stock exchange in 2007.
But it hasn't all been plain sailing for the business. When it floated in 2007 the chairman resigned after three months, fed up with trying to persuade Ashley and his team to play by usual City rules.
The retailer missed profits targets and Ashley upset investors, calling them "cry?babies".
The recession provided the perfect boost for the bargain-basement retailer. The rise and rise of Sports Direct has come at a time when much of the high street has been in decline.
A recent report by the British Retail Consortium found that there are more empty shops on the high street than ever?before.
However, Ashley's firm has managed to increase its customer numbers, winning them from a wide range of retailers and offering lower prices than its rivals.
According to analysts at Verdict Retail, Sports Direct will take ?9 of every ?100 spent on footwear in the UK this year. Nearly one in four pairs of trainers in the UK are now sold by Sports Direct, a rise of 45% since 2006.
Honor Westnedge, a senior analyst at Verdict, said: "They have a really good understanding of who their customers are, and you can find branded goods that you probably wouldn't find as cheap anywhere else."
The company has snapped up a range of sports brands including Dunlop, Slazenger, Karrimor and Lonsdale, along with fashion labels such as Firetrap. Owning the brand means higher profit margins.
It is no longer just teenagers and 20-somethings looking for a good deal who squeeze between the rails of the packed stores. According to analysts at Kantar Worldpanel, the retailer now has more customers aged over 55 than under?25.
Source: http://www.guardian.co.uk/business/2013/jul/18/sports-direct-staff-bonus-profits
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