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Who is Mike Ashley? Analysing one of Britain’s most controversial retail magnates

From building one of Britain's biggest retail chains in Sports Direct to accusing shareholders of stabbing him in the back in a "Donald Trumpian" statement, Mike Ashley is one of the most colourful, unorthodox and controversial characters in business. Dan Robinson looks at his rapid rise and the problems he now faces as investors revolt

He’s one of Britain’s most controversial businessmen and rarely a week goes by when he’s not in the headlines – but who is Mike Ashley?

The Sports Direct tycoon has become a magnet for attention – sometimes positive but more often than not negative – for his non-conformative attitude and unorthodox business practices.

He’s been up before MPs to answer questions about “Victorian” working conditions at the sportswear retailer’s warehouse and zero-hours contracts, while his profile has increased as he’s snapped up numerous high street chains – most recently House of Fraser when it collapsed into administration.

And despite not being the most willing of participants within the public eye, his sudden impulse to release a strongly-worded statement last week in which he claimed to have been “stabbed in the back” by shareholders was another eyebrow-raising moment labelled both “Elon Musk-esque” and “Donald Trumpian”.

Yet there are few questions about his ability to grow a business, having taken Sports Direct from a single shop named after himself to a FTSE 250 industry giant that continues to expand globally – while amassing a £2.8bn fortune in the process.

Compelo looks at how Ashley – also well-known for his ownership of Newcastle United FC – reached this point and finds out from analysts how he is perceived within retail.

 

Who is Mike Ashley? Building Britain’s biggest sportswear empire

It was back in 1982 when former squash coach Ashley – who had left school at 16 – opened his first sports shop named Mike Ashley Sports in Maidenhead, Berkshire, after receiving a £10,000 loan from his family.

He followed this with more shops in and around London, and expanded the chain rapidly in the 1990s, reaching 100 stores around the turn of the millennium.

During the early 2000s, it had a number of rebrands, from Sports Soccer and Sports World to eventually its current guise as Sports Direct.

The company hit a milestone in February 2007, when it was floated on the London Stock Exchange as a public company with a valuation of £2.5bn. Ashley still owns about 60% of the company and remains CEO.

The IPO helped Sports Direct build its retail stock to about 670 stores worldwide now, including about 500 in the UK – where it employs 5,100 people.

 

Who is Mike Ashley? Criticism of ‘Victorian’ working conditions at Sports Direct

This is only the beginning of the Sports Direct story, however, as it has bounced from one controversy to another in recent times.

In 2013, it was revealed that nine in ten staff were employed on zero-hours contracts, while it has also been investigated by HMRC over employees being paid below the minimum wage.

Investigations by The Guardian and Channel 4’s Dispatches TV programme discovered a number of issues at its warehouse in Shirebrook, Derbyshire, where about 3,000 people are employed.

Working conditions were compared to a “sweatshop” from the Victorian era, with bosses accused of punishing staff if they talked and staff fined if they arrived late.

A Freedom of Information request by the BBC found that, between January 2013 and December 2014, 76 ambulances or paramedic cars were sent to the postcode for the Sports Direct distribution centre – while one woman gave birth in a toilet on site.

Sports Direct, Sports Direct warehouse, Who is Mike Ashley
Sports Direct’s warehouse in Shirebrook, Derbyshire (Picture: Google)

Ashley was hauled before the Business, Innovation and Skills Committee in June 2016 to answer questions from MPs and he admitted many of the issues existed. A subsequent government report highlighted “appalling working practices at both the Sports Direct shops and warehouses”.

In September 2016, Sports Direct vowed to improve conditions and ensure all staff were treated with “dignity and respect”, with pledges including to offer casual retail staff guaranteed hours and transfer some warehouse staff to permanent contracts.

But 12 months later, reports said the company had failed to meet those targets and Unite questioned how sincere the business was about “cleaning up its act”.

Tony Shiret, a retail analyst at London stock broker Whitman Howard, believes the company is improving its processes “bit-by-bit” but it will take time due to its culture of “playing hardball” and the need for making bigger changes than most other retailers.

He adds: “The company could do with sharpening up its act a bit in terms of anticipating criticism and heading it off – because it can become a distraction.

“I’m sure it could do a better job across a whole bunch of areas. Most businesses could. It probably needs to have a wider appreciation of all parts of its business practices and that would help quite a bit.

“The issue is whether it could preserve the underlying dynamic of the business if you make lot of changes to bring it in line with other companies – although it should be easy enough to treat your staff well and there has been some progress in that area.

“Mike Ashley is a bit of a lightning rod for criticism and, while Sports Direct has made improvements, I’m not saying that what it does is best practice because clearly it isn’t in some areas.”

 

Who is Mike Ashley? Building a retail empire

Since the Sports Direct flotation, Ashley has significantly grown his influence within retail through buying up shares and whole entities within a number of companies.

Among the retailers he now owns stakes in are Blacks, JD Sports, French Connection, Game, Debenhams, USC and Flannels, while the brands now under Sports Direct ownership include Dunlop, Slazenger, Kangol, SoulCal and Firetrap.

In August, he took over 169-year-old department store chain House of Fraser in a £90m deal hours after it collapsed into administration, saying he intended to transform it into the “Harrods of the high street”.

Observers said it was a big coup for the businessman as he was believed to harbour ambitions of moving his retail empire upmarket.

House of Fraser, retailers
House of Fraser’s store in Cardiff, Wales (Geograph/Jaggery)

Some industry experts have suggested he might seek to buy out Debenhams, of which he owns almost 30%, and merge it with House of Fraser.

But Mr Shiret believes this could prove challenging, saying: “There’s a bit of acquisition risk with House of Fraser because historically integrating companies has been a weak part of his business.

“I don’t think anything that’s going on is damaging his reputation, which is already pretty low. Saving jobs at House of Fraser should actually improve it.”

Patrick O’Brien, UK retail research director at data and analytics company GlobalData, says the shock nature of the deal also encapsulates the uncompromising way he chooses to do business.

He adds: “Mike Ashley’s style is definitely one where the business is very much about him, even if it’s a public company with a lot of minority shareholders.

“That’s especially true of the way he takes a punt in investing in other retailers like House of Fraser, Debenhams and Game.

“This kind of thing annoys minority shareholders because if they wanted to invest then they’d do it themselves rather than using Sports Direct money.”

Analysts at Peel Hunt have also criticised his lack of engagement with the investment community, telling Business of Fashion in August: “What a shame Sports Direct refuses to engage with City analysts.

“The House of Fraser deal is fascinating but the lack of any shared strategic plan for the stores means that we can’t embrace management’s excitement with the deal.”

 

 

Who is Mike Ashley? Elevation into public life as a football owner

Having previously lived a fiercely private life in which little was known about him and few photographs existed, a series of moves propelled Ashley’s profile into another stratosphere.

Intrigue surrounding such a successful self-made businessman was raised when he took Sports Direct public, but it was after he bought Newcastle United for £134m in the summer of 2007 that he became a household name.

Following the likes of Roman Abramovich as a billionaire football club owner, Newcastle fans held high hopes that their new owner’s serious wealth could lead them to winning some silverware.

The reality couldn’t have been more different.

Mike Ashley, football club owners
Newcastle United and Sports Direct owner Mike Ashley

Having initially demonstrated the non-conforming behaviour displayed in business – he’s known for making deals in a pub rather than a boardroom – by standing alongside fans wearing replica shirts and swigging beers at away matches, he sparked outrage when iconic manager Kevin Keegan resigned in September 2008 due to Ashley’s running of the club.

The following year, a tribunal ordered Newcastle to pay £2m in damages to Keegan for breaching the terms of its contract with the manager over transfers.

During the hearing, the club admitted that it had “repeatedly and intentionally misled the press, public and the fans of Newcastle United”. 

During his tenure, Ashley has presided over a fall from grace in which the club has been relegated twice from the Premier League, been consistently outspent by the rest of the division and racked up debts – which have risen from £75m owed externally in 2007 to £144m in the form of interest-free loans from Ashley.

Protests against his ownership have been a recurring theme over the past decade, with the latest fan activity designed to interrupt his businesses in a bid to force him to sell the club.

This was also a tactic used by fans of Scottish side Rangers after he bought an 8.92% stake that he tried to increase – while also imposing retail contracts on the club that favoured his sportswear company. He sold his shares in the club last year.

 

Who is Mike Ashley? Reputation problems

While Ashley’s stock in football is at an all-time low, his primary concern’s reputation isn’t exactly glowing either.

In August 2017, Sports Direct finished bottom in a list of 100 big brands ranked by customer service ratings.

The company had fallen 27 places since 2015 in the survey of 3,000 consumers by Which?.

And in August this year, the retailer ranked as the UK’s worst retailer in terms of reputation, according to the 2018 UK Retail RepTrak in August.

The report by the Reputation Institute, which analysed ratings from 5,175 consumers on 50 nominated companies, said its position was based on a 73% profit decline in July and widespread condemnation of its treatment of staff.

Who is Mike Ashley?
Mike Ashley appearing before MPs to answer questions about poor working conditions and business practices at Sports Direct (Picture: Parliament)

Finding an auditor has been no easy task of late, either, after long-term partner Grant Thornton was forced to step aside due to competition rules.

The website Consultancy.uk says the Big Four accountancy firms – PwC, KPMG, EY and Deloitte – are now wary of becoming involved with the retailer due to the company being a magnet for controversy.

If that’s not bad enough, British press regulator Ipso ruled that Ashley can legitimately be compared to North Korean dictator Kim Jong-un after he lost a complaint against an article in The Times saying he shared many characteristics with the tyrannical supreme leader.

 

Who is Mike Ashley? An ‘extraordinary’ AGM, falling share prices and public statement points to difficulties

The unease surrounding Sports Direct has reached boiling point over the past month or so, with the crescendo coming at the annual general meeting (AGM) last week.

Annual profits fell from £281.6m to £77.5m in the year to April 2018, partly due to Debenhams’ struggles, while share prices had dropped from £3.87 on 21 August to £3.44 by this morning (21 September).

It followed issues with French Connection – of which it owns a 27% stake – and the fallout from House of Fraser’s filing for administration.

Ahead of the shareholders’ meeting, his chairman Keith Hellawell was forced to resign under pressure from shareholders, while 37% voted to block Ashley’s reappointment as director in a failed bid to oust him.

It followed recommendations by three shareholder advisory groups to vote against him due to alleged poor corporate governance and continuing concerns about employment practices.

Sports Direct, Who is Mike Ashley?
Sports Direct’s share price has plummeted between 22 August and 21 September

Ashley had initially stated he wouldn’t turn up to the AGM in central London last week. He made a U-turn on the decision but refused to take questions from attendees and the meeting only lasted 15 minutes.

By the end of the week, he released an official statement to the London Stock Exchange in which he said “true entrepreneurs will never be accepted in the public arena”, complained about the “media circus surrounding Sports Direct” and suggested he might stop talking to shareholders.

He said: “Despite the substantial progress made over the last few years, the shareholders have now made it extremely challenging for future engagement to take place.

“On the one hand they are delighted with our performance and progress, yet with the other hand they have stabbed Sports Direct and myself in the back by repeatedly hounding Keith Hellawell.”

While some commentators said the statement was “Elon Musk-esque”, retail analyst Mr O’Brien likens it more to a Donald Trump outburst and questions why his PR company Keith Bishop Associates allowed it to be released.

He says: “It seems to me that he’s thinking if those investors had been there for a lengthy amount of time, he would have been delivering good results for them over the last ten years, so he thinks they’re being a bit ungrateful.

“But it was a strange statement and an extraordinary one to put out as official communication. It’s difficult to see what he wants to take from it.

“This wasn’t someone in an interview with a journalist speaking off the cuff, it was put out on the wires to the stock exchange.

Sports Direct sale, Sports Direct, Who is Mike Ashley
A Sports Direct store (Picture: Wikipedia Commons/Edward Hands)

“It looks like someone who’s really hurting from the AGM. It’s strange that the PR company he employs doesn’t stop him from putting it out because it’s opened him up to a lot of ridicule.

“It’s almost Donald Trump-esque in its language and the way he’s being economical with the truth.”

Mr O’Brien believes the statement could suggest Ashley is looking to take the company back into private ownership.

He adds: “Do investors want to be putting their money behind that man? Some will be concerned at the certain level of unpredictability and the fact he doesn’t seem to want to play by the rules because he does want to treat the business as his own.

“He doesn’t like to be held to account by the media or minority shareholders, so that would be a concern for anyone looking to invest.

“He said he wasn’t going to turn up to the AGM, which is extraordinary in itself. Then to remove the chairman the day before, under pressure to do so, and refuse to answer any questions, was incredible.

“It’s very obvious that he finds it difficult to deal with the press and criticism of himself by the media and everyone else.”

Mr Shiret believes his thorny relationship with shareholders stems from the fact he’s more of a “risk-taker” than the average fund manager.

“Things that seem perfectly natural behaviour to him – because he’s done it for donkey’s years in private ownership – looks aggressive to people who are dealing with him in an investment context,” he says.

“He’s a different type of person and owns 60% of the company. While he’d like to be liked better, at the end of the day he does what’s best for the business in his opinion.”

 

 

Who is Mike Ashley? Where does Sports Direct go from here?

While it’s undoubtedly a stormy period for Sports Direct right now, analysts are keen to point out it’s a difficult time for all retailers.

Mr Shiret believes Ashley has done a “reasonable job” lately, saying: “Particularly with really sustaining profit and recovering from the problems he had when, post-Brexit, they did not have currency hedging so it killed the company for a year.

“Now, relative to other people in the market, it’s in a better position and much more stable, meaning he can make strategic moves that others just really can’t.

“You can look at this in terms of the obvious manifestations in terms of ignoring external opinions and broadly running a business in a very aggressive way, or you can look at it in terms of timescales.

Mr O’Brien says the company remains “strong” with a £1.8bn valuation but admits the bad publicity surrounding the retailer has affected its performance – while it is also having to compete with rivals that are upping their game.

Gymshark
Gymshark, set up in 2012, is a fitness apparel and accessories brand, manufacturer and online retailer

He adds: “JD Sports has taken over it in a lot of ways in terms of its push on fashion trainers and goods, and having a much better store.

“Decathlon and Mountain Warehouse’s revenue has been growing double-digit year-on-year. Decathlon has about 30 stores in the UK but is aiming for 300 in 10 years.

“There’s a lot of online players like ASOS, which is moving into sportswear, and Gymshark.

“Sports Direct is going to struggle with when it’s got so many physical locations – 500 stores in the UK – and its online offer isn’t particularly strong, so that’s not going to make up for dwindling footfall, which is undoubtedly the trend for the high street.

“People are cutting down the frequency that they go to shops and if they do, they want to go to premium locations.

“That’s not to say Sports Direct is in any imminent danger but it’s going to find the next few years challenging.”