Mike Ashley: Britain’s “Mr High Street”

Here in Financial Regulation Matters we have discussed the precarious future of the British high street on a number of occasions, ranging from discussing the collapse of BHS, the rise in the number of corporate failures, and the impact that the personal debt crisis is having upon the futures of high street stalwarts. We also looked recently at the case of House of Fraser, both in relation to its near-collapse and then its subsequent rescue. As we speak, another British high-street mainstay – HMV – is in crisis talks over a rescue bid from Sports Direct supremo Mike Ashley and, if Ashley does incorporate HMV into his retail empire, then his imprint on the British high street will be more than considerable. Therefore, in this post, we will ask who is Mike Ashley and question how the British high street will continue to be transformed in the wake of such rapid development.

Starting with HMV – and if reports are to be believed – Mike Ashley has ‘enter[ed] the bidding for HMV’. The Financial Times suggests that Ashley is one of several parties bidding for the struggling retailer, which has entered administration for the second time in just six years and has put more than 2000 jobs at risk. After being purchased by Hilco Capital in 2013, the 125 store group has since struggled with the ever-changing and volatile environment surrounding high street retailers in the current climate. Additionally, The Independent reports that Ashley is considering making a move for another struggling retailer – Debenhams – which is currently seeking to refinance its debt position after a difficult 2018; Ashley’s Sports Direct already owns 30% of the retailer. The newspaper reports that, in relation to HMV, Ashley tabled a bid through the retailer’s administrators KPMG last week although, as of yet, there is no news as to whether this bid has been accepted. It is also being reported that there is some will on behalf of associated suppliers to see HMV continue, as there are fears that losing another major retailer in this sector would see Amazon’s position in the marketplace strengthened even more. If that is the case, then Ashley’s play for HMV may bear fruit. In that eventuality, Ashley will have gained a considerable foothold on the British high street with him acquiring House of Fraser, Evans Cycles, and purchasing large stakes in French Connection and Debenhams in 2018. So, who is this massive presence on the British High Street?

Michael James Wallace Ashley is 54 years old, and was born in Burnham. Ashley is renowned for his reclusive nature, so very little is known about his early years. It is suggested that after graduating from Grammar School at 16, he played squash at the county level until an injury cut short his playing career. In 1982, after relying on a £10,000 loan from his family, Ashley opened a sports and ski shop and then, subsequently, opened a number of other stores across London – by 1990, he had ‘opened 100 stores across the UK’. Towards the end of the 1990s, Ashley rebranded these stores as ‘Sports Soccer’, which would eventually become the ‘Sports Direct’ brand we know today. Ashley’s pathway was not typical, and there are a number of anecdotes which exist to supplement this narrative of Ashley becoming the business powerhouse we know today his own way. The Guardian details a story how, when meeting with retailing powerhouses in the early 2000s to discuss the pricing of football replica kits, Dave Whelan – the owner of former high street retailer JJB Sports – mistook Ashley for a gardener and told the young entrepreneur ‘there’s a club in the north son, and you’re not part of it’. The newspaper then questions whether that interaction was the motivation, but Ashley then went on to turn into a whistleblower and reported his rivals to the Office of Fair Trading for fixing the price of football kits – the result was a devastating blow to the industry and saw a number of retailers investigated and ultimately fined.

It was commented that the ‘club in the north’ had been smashed by a ‘canny and aggressive operator’, and that canny and aggressive operator embarked upon a massive M&A spree not long after this period. Since then, Ashley has acquired a myriad of brands including Dunlop, Slazenger, Karrimor, Kangol, and many others. These acquisitions allowed Ashley to stock his stores with low-value products that would be devoured by the British public. During this period of expansion, Ashley would suffer personally, with the well-publicised divorce from his then-wife Linda Jerlmyr in 2003 resulting in a then-record divorce settlement of £50 million. Yet, in 2007, Ashley embarked on his most public business venture yet when he purchased Newcastle United Football Club for an initial £55 million, rising to £133 million. This decision has been one that has had mixed results for Ashley. The move has propelled him into the British public like no other, such is the appetite for Football in Britain, and has forced him to be more public than one assumes he would like to be. However, only yesterday it was announced that Newcastle United are, based on 2017/18 revenue, the 19^th richest football club in the world. Whilst Ashley is embroiled in public discourse over his ownership of the club, and is technically looking to sell the club, it is proving to be particularly lucrative.

Yet, this story of a self-made British billionaire contains controversy too. His lifestyle is something that has filled many column inches, with stories of excessive drinking, large gambling ventures, and an overall difficult personality surrounded by a very close circle being chief amongst that coverage. However, it has also been noted that Ashley is courteous, professional, and forward-thinking by a number of people who have worked with him in the past. However, perhaps one of the most damaging controversies emanated from a series of reports into working conditions at Sports Direct’s massive warehouse in Derby. The Guardian, in producing a series of investigative reports, likened the warehouse to a ‘gulag’ and observed a number of work practices that it described as ‘workhouse’ not a ‘warehouse’. The details of the investigation can be found here, but the impact upon public perception should not be underestimated.

As is the way with media cycles, however, the dust soon settled after those investigative reports in 2015. Now, the focus is on both the tycoon’s handling of Newcastle United, and his approach to purchasing a number of high street brands at discounted prices, on account of their struggles. There has been opinion in the press that this HMV deal will be a deal too far for Ashley, and that ‘he has his hands full with House of Fraser’. This may be the case, but analysing Ashley’s development suggests a different eventuality.

Ashley is in the process of reforming Debenhams, and with his takeover of House of Fraser now complete, it is likely the British high street will some amalgamation of the two brands. Additionally, if he can purchase HMV, there is a natural amalgamation between that brand and the Game brand which he already owns. It appears that Ashley exists on the principle of economies of scale which, although it is a rather simplistic understanding of what is a very complicated business, provides a model for both why Ashley has been successful and also what will likely protect him from the American powerhouse, Amazon. Though retail figures fluctuate wildly, it is not being suggested that the high street will cease to exist – people are continuing to shop on the high street. What is changing, however, is the methods with which retailers can operate in such an inhospitable climate – perhaps Ashley’s model is the only one which can survive such an environment.

The self-made billionaire is constantly being questioned, and having his business decisions queried. Yet, if we look at his progression, he is extraordinarily successful. Critics of his move into football, and there are many, need only look at the recent financial figures from the footballing world to see why he was attracted to the marketplace in the first place. For Ashley, the goal is to develop and expand, and as a result he is a very rich man. His methods are often questioned, and examples such as the working conditions in Derby make his story one of massive public interest, but it is unlikely the trajectory of his story will change any time soon. In following the pathway Ashley has followed – ruthless expansion – there will often be many controversies (we can think of Apple using sweatshop labour where many commit suicide as a prime example), but he will continue his success. That success will likely be typified by a different high street than what the British public are used to. The new high street will be characterised by lower cost items, and a lot of cross-pollination between the stores – expect to see a number of the same brands available in very different stores. The British public will adapt to the changes, and Ashley will more-than-likely rewarded for having the foresight to capitalise on the misfortune of a number of his rivals, just as he did in the sporting retail arena.

Keywords – Business, Mike Ashley, Retail, UK, @finregmatters