2,000 Sports Direct staff to net £76,500 each after record profits

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Sports Direct

Sports Direct has had an astonishing year, with profits up 40%. Thanks to an extraordinarily generous share scheme, 2,000 eligible staff are going to share in this good fortune, with bonuses paid out in millions of shares. An employee on £20,000 in 2009 will get 1,200 shares - which is currently worth around £76,500.

So why is this payout so enormous?


The size of the payout is due to two things: first the success of the business, and second the generosity of the scheme itself.

Success

The business is one of the few incredible success stories of the high street in recent years. It was established in 1982, and through the good times and bad, its policy of high volume, highly discounted stock has had a strong appeal to cash-strapped consumers.

By 1996 it had 50 stores and the Donnay brand. By 2003 there were 150 stores, the Lilywhites chain and the Lonsdale brand. By 2007 there were a vast number of brands under the umbrella, including Slazenger, Kangol, LA Gear and No Fear. The intervening years have seen the acquisition of more brands, including Everlast and the Field and Trek stores. It now operates 396 stores, is the biggest sports retailer in the country, and last year it made a profit of £207.2 million.

Generous

Chief Executive Dave Forsey attributes a great deal of this success to the bonus scheme, as everyone has so much to gain from the success of the business. He said his annual statement: "There is no doubt that the Group's record-breaking results were in the large part down to our colleagues and their hard work. The Employee Bonus Share Schemes have continued to drive this performance and we are pleased that eligible employees will be rewarded in August as the second and final part of the 2009 Employee Bonus Share Scheme vests."

He adds that the share scheme has: "been a fundamental tool which the Group has used to promote, incentivise and motivate its staff. Sharing the responsibility of achieving these targets was matched by the potential benefits to employees if the targets were met. The schemes have been crucial to influencing staff behaviour and maximising the Group performance."

The fact that profit has risen faster than sales means that staff have been successfully doing their bit to squeeze more profits out of the business.

Only 2,000 of the 24,000 staff were eligible for this payout, partly because of staff turnover - which is around 16% a year, and partly because fewer staff were employed in 2009. However, those staff who were eligible for the 2011 scheme have also hit their first target.

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What next?

Those who have made these bumper windfalls have the choice of either keeping all or part of them as shares in the hope they go up further in value, or selling them for a profit now.

The shares can be traded on the stock exchange and the company will make it easy for employees to sell them. On the other hand, they have delivered such strong results that there may be those who feel that the share price will rise even further, and take the size of their payout even higher.

It's just up to each individual to decide whether they are willing to take a risk with the windfall, or whether they could do with the cash immediately.

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