--- Updates with results of annual general meeting ---
Sports Direct International will have to try again in its bid to keep its chairman as independent investors opposed his re-election on Wednesday.
A majority of the retailer's independent shareholders failed to back a resolution to re-appoint Keith Hellawell, who has faced criticism over its employment practices and corporate governance.
Sports Direct will now put that resolution to shareholders of the company at a general meeting in the next 120 days, during which time Hellawell will remain in post.
Hellawell said: "I take this clear message from our independent shareholders seriously, and I will do my best to address their concerns and earn their confidence over the next year.
"I have confirmed today that should I not receive the support of a majority of our independent shareholders at next year's AGM, I will step down at that time with immediate effect."
In a vote of all shareholders, about 81% of votes cast were in favour of re-electing Hellawell and 92% in favour of re-electing founder and majority shareholder Mike Ashley.
But Hellawell only got just over 47% of the votes in an independent resolution to re-elect him, with nearly 53% against.
The meeting was predictably lively, with the BBC reporting that shareholders momentarily cornered Ashley, who also owns Newcastle United.
Standard Life Investments, which holds 34 million shares on behalf of investors, opposed Sports Direct’s remuneration report and the reappointment of all non-executive directors at the AGM.
A Standard Life spokesman said the investor believed Sports Direct had scale and long-term potential.
But he added: "To achieve that potential, we increasingly believe a structural change in the way the company is governed is now required."
Hermes Investment Management and mutual Royal London were reportedly set to back a resolution demanding an independent review of the company’s controversial labour practices.
Hermes had also vowed to vote against the re-election of Hellawell, chief executive Dave Forsey and two directors.
Other investors including Legal & General Group Plc, Aberdeen Asset Management and Royal London were understood to be unhappy with Hellawell’s performance.
Shares in the group fell more than 10% on Wednesday following the result of the meeting, having recovered during the afternoon after early falls.
The stock dropped as low as 309.6p after the beleaguered retailer warned on profits and caught some investors off-guard with a new focus on property acquisitions. At 3.40pm it was 10.1% down at 314.3p.
The meeting had always promised to be stormy after it leaked out that Hellawell had offered to quit at the weekend, only to have the offer rejected by the board.
The day got off to a bad start as the retailer forecasted earnings of £300mln for the year, down from a previous estimate of between £380mln and £420mln.
Concerns that plans for a £300mln-plus property spending spree might disrupt the company's focus on the day-to-day business also appeared to hit the shares.
Broker Cantor Fitzgerald said the profit guidance downgrade was expected, but expressed surprise at the company’s change of strategy to focus more on property development.
Analyst Freddie George said: “It appears the company is planning to channel more of its strong free cashflow into investing in freehold properties and strategic investments rather than the underlying business.
“We continue to prefer JD Sports, which has a similar rating, and has the unequivocal support of the brands, Nike and Adidas, and has clearer visibility on its strategy.”
Resignation rebuffed
Shareholder groups have criticised former West Yorkshire Police chief Hellawell as the firm has faced questions over claims of "Victorian" working practices in its shops and warehouse.
But Sports Direct said in a statement: "Dr Hellawell offered to step down over the weekend in the light of the shortcomings highlighted in the report, but he will stay in his role to assist with making further improvements."
AJ Bell investment director Russ Mould said: “Sports Direct’s decision to reject Hellawell’s offer to step down over shortcomings in working practices will not sit well with shareholders.
“They want fundamental changes at the top of the organisation and have criticised him for failing to show sufficient leadership.”
Something else that may have hit the shares, which rose 5% on Tuesday, may have been the group's reiteration that Ashley still was declining to take the company private.
The chain said on Tuesday that a review of its procedures carried out by its lawyers had revealed the failings, which it said it "deeply regrets and apologises for".
It said it would begin offering casual retail staff the option of guaranteed hours as well as "zero-hours" contracts, under which employers do not have to commit to provide regular work.
Sports Direct also said breaches of National Minimum Wage rules in its Nottinghamshire warehouse were unacceptable but not intentional.