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Comment: Sports Direct's 'premium lifestyle' strategy makes sense

It’s no secret that Mike Ashley has an appetite for snapping up small UK independents, but his ambitions for their future under the Sports Direct umbrella are far bigger.

Flannels store opening plymouth  40

The much-criticised retail boss has beefed up his premium lifestyle division in recent years, acquiring premium mini-chain Van Mildert, Box Clothing and Tucci, along with high street chain USC and designer firms Cruise and Flannels. Since then, Ashley has been rationalising the portfolio, including by quietly retiring the eight-store Tucci name, rebranding all of its units as Van Mildert and redirecting its ecommerce site.

At the same time Sports Direct has been working away on a new 20,000 sq ft store for Flannels in Plymouth, its ninth in the UK, with a further three, including a central London flagship, in the pipeline. Industry observers have suggested it won’t be the last change seen within the division.

“This seems to be phase one of a longer term re-jigging,” said one source. “I think a later phase of this plan will be that Van Mildert also closes along with Cruise, and all the stores will become Flannels, because that is the focus for the business along with USC on the high street side.”

Tucci

Tucci

“Van Mildert only really has clout in the northeast and in Scotland,” added another observer. “It would make sense in terms of running a business to have just one name, particularly when it comes to producing things like bags.

“Flannels has been around longer and is definitely better known so if they were looking to slim down on all these little regional businesses they’ve acquired it would make sense to keep Flannels.”

Streamlining would certainly make sense, especially when you look at the overlap of brands and even how Sports Direct describes the businesses online:

  • · “Flannels is one of the UK’s leading luxury retailers…”
  • · “Cruise is recognised as one of the UK’s leading luxury retailers…”
  • · “Van Mildert is recognised as one of the UK’s leading, independent luxury retailers…”
BrandVan MildertFlannelsCruise

Canada Goose

Dolce & Gabbana

Paul Smith

Stone Island

Versus Versace

And the respective balance sheets also suggest where Sports Direct should be focusing its efforts.

In the year to April 26, 2015, Van Mildert made a loss of £3.1m, widening from a £816,000 loss the previous year. Cruise also posted a loss of £810,000, despite narrowing losses from £1.7m the year before. Meanwhile during the same period, Flannels made a £1.7m annual profit, an improvement on a £1.6m loss during 2014.

While it declined to comment on the speculation, in its preliminary results in December Sports Direct flagged its intention to take a “group approach” to the division through “shared buying and improved stock control and replenishment processes”. It added it intends to look at “enhancing existing space and investing in new flagship locations”.

Despite breaking down the store count across the division into USC (54), Cruise (10), Flannels (8, now 9), Van Mildert (11) and ‘other’ in the results, it only goes into further detail for Flannels and USC. Under Flannels, it says its aim is to “enhance” the brand’s positions “as a premium multi-brand retail destination”, while it plans to simultaneously push USC to become “the leading multi-brand high street fashion retailer in the UK”.

While having a glut of brands under your ownership may seem appealing, it would be logical to shrink the division down to two fascias – Flannels for the high end and USC for the high street.

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