As the Premier League season kicks off, we take a look one of retail’s most prominent figures in the world of sports retail.
Once a very private and somewhat enigmatic businessman, Mike Ashley has become an increasingly recognisable character. Since his acquisition of Newcastle United Football Club in 2007 for a reported £134m, Ashley has become an outspoken and often controversial figure. The majority shareholder (previously owner) of Sports Direct has developed a reputation as something of a ‘bruiser’ in the industry, unafraid of public clashes with shareholders and suppliers alike.
There can be no doubting his business credentials, however. Whilst Sports Direct has been described as the ‘craziest business on the high street’ with stores resembling a ‘jumble sale’, its performance has been nothing if not impressive. In the financial year to April 2014, Sports Direct reported a 24% rise in sales to £2.7bn, while pre-tax profits increased 16% to £239.5m.
The key to Sports Direct’s success, according to its chief executive Dave Forsey, is its logistical capability. Since 2008, when share prices fell to a fraction of their floating price in 2007 (from 300p to 32p), Sports Direct has focused on going ‘back to basics’. From the company’s central warehouse in Shirebrook, Derbyshire, stock can be shipped quickly and efficiently across the network of over 200 stores.
It has not all been smooth sailing for Ashley and Sports Direct, however. Since a BBC documentary in 2008 investigating Ashley’s Lonsdale factories in Thailand (about which Ashley refused to comment), working practices at Sports Direct have come under scrutiny. Recent allegations about the zero-hour contracts used to employ up to 20,000 workers have called into question the integrity of the business. Furthermore, a long-running dispute with Adidas threatened to jeopardise the supply of best-selling products such as the official replica Chelsea Football Club shirt, as well as the shirts of national sides (including Spain) in the run up to the World Cup.
Nevertheless, in 2013 Sports Direct introduced a share scheme worth £112m to the 2,000 full-time employees who subscribed, which meant that a worker earning £20,000 received a pay-out worth £79,000.
Ashley’s success has been in the acquisition of brands, normally in financial distress, such as Dunlop Slazenger, Kangol and Lonsdale. These products have then been sold cheaply alongside brands such as Nike and Adidas. According to Forbes, Ashley runs Sports Direct as a ‘portfolio’ with an unusually high degree of control over the direction of the company. Ashley personally collected £1.2bn when he floated Sports Direct in 2007, and recently sold £200m of shares to Goldman Sachs in response to shareholders’ rejection of his proposed bonus scheme (Ashley’s stake is now at 57.5%).
Where next for Ashley? As well as securing a deal with Australian online retailer MySale Group (Ashley also plans to open four stores in Australia and New Zealand), the billionaire plans to increase efforts to export Sports Direct to Europe. His strategy is to attract the interest of local partners through opening a number of shops in target markets, but warned that he was willing to pursue a more aggressive approach if necessary. He was quoted in RetailWeek as saying, ‘Work with us and we’ll make a lot of money together’, Ashley went on to warn, ‘If you don’t want to play, we’ll come to your country and smash you to bits’.