Sports Direct tycoon Mike Ashley has taken a £124 million hit to his wealth after shares in the retail chain he founded slumped in the advent of a damning stock market note from a leading broker.
Analysts at investment bank Berenberg have said they were “unconvinced” by Sports Direct’s ambitions to create the “Selfridges of Sport” and believe Ashley’s firm would be pushed aside by the likes of Nike and Adidas.
As a result, the bank stuck a “sell” rating Sports Direct shares, along with a 270p price target.
Meanwhile, Sports Direct’s main competitor JD Sports was given a “buy” recommendation by Berenberg, as well as a 530p price target.
The news prompted shares in Sports Direct to plunge by almost seven per cent yesterday to 302.6p, which left a £124 million dent in Ashley’s wealth, according to The Daily Mail.
Berenberg said the move from major sportswear brands – such as Nike or Adidas – towards building out their direct-to-consumer channels should be viewed as an opportunity for the likes of JD Sports, and a threat to others like Sports Direct.
The bank highlighted that although major sportswear brands were increasingly expanding their direct-to-consumer offerings, it thought JD Sports was a “key strategic retailer” and that it should actually command a greater share of the best product allocations.
Berenberg added that Sports Direct and other “lower-quality wholesale partners” would suffer as the major sportswear brands companies look to position their goods with more premium retailers.
Additionally, Berenberg said Sports Direct had the “weakest online proposition”, leaving it most at risk to the threat posed by Amazon.
“The online giant is already the second-most visited UK sports retailer and has forged encouraging partnerships with Nike and Adidas in the US,” the bank said in its stock market note.
“Amazon is already better than Sports Direct on product range, price and convenience.”
The firm added: “JD is a best-in-class sports retailer and key global strategic partner to brands, capturing a compelling international growth opportunity.
“Sports Direct, however, is beset by structural headwinds, while growing competitive threats will weigh on its positioning.
“It also faces corporate governance risks and, in our view, its strategy lacks clarity and credibility.”
The Retail Gazette has approached Sports Direct for comment.