Industry insiders have questioned Mike Ashley’s long-term strategy as he continues to “irrationally hoover up the high street”.
Less than a fortnight after Sports Direct group said it would have thought twice about buying House of Fraser last August, the Sports Direct boss this week bought another floundering retailer, Jack Wills, for £12.75m.
Will Wright and Chris Pole from KPMG were appointed joint administrators of the casualwear brand on 5 August, and immediately sold it and its UK trading assets to Sports Direct International.
All Jack Wills’ 100 stores in the UK and Ireland, its distribution centre and 1,700 employees will be transferred to Sports Direct. The company said its directors are currently assessing options for the international arm of the business.
Jack Wills’ most recent financial results, for the year to 28 January 2018, show a pre-tax loss of £29.3m. Turnover fell by 1.1% to £129.3m.
“It seems very odd that Ashley has bought Jack Wills so soon after his comments about regretting the purchase of House of Fraser,” one former Jack Wills supplier said.
“It’s very sad that he’s got his hands on it because I don’t think he knows what he’s doing. It’s going to be a disaster.”
One industry veteran close to the situation agreed: “I don’t think anyone’s got a clue what Mike Ashley is doing, including Mike Ashley. He doesn’t seem to have any logical strategy.
“He went into House of Fraser blindly, and has since come out and said he shouldn’t have bought it. This proves there is no serious strategy within the group, and it should be something of concern. I think he might regret this in a year’s time.”
Retail analyst Richard Hyman agreed: “I’m not surprised he’s bought Jack Wills because he seems to be irrationally hoovering up the high street.”
Richard Lim, CEO of research consultancy Retail Economics, observed: “Ashley is spreading himself too thin. He’s already got HoF and trying to turn that around, which is by no means straightforward. These purchases are a distraction from the core of the business [Sports Direct].”
Retail analyst Mark Pilkington said: “The acquisition of Jack Wills by Mike Ashley is a case of the maverick retailer doubling down on his ‘buy and combine’ strategy to take over large parts of the high street, hoping to consolidate overhead costs faster than sales are dropping. It is highly questionable if this will work, as is shown by the debacle at House of Fraser.
“Institutional investors are already furious about Mike Ashley riding roughshod over all the normal governance rules, and we may see a shareholder rebellion against the deal.”
One property consultant said Jack Wills will likely become an in-house brand for the Sports Direct Group and all of its stores will close: “Ashley will get rid of the stores that lose money now and gradually work through them. He sees Jack Wills as a major in-house brand that will go into the House of Fraser stores, and he will eventually get rid of the standalones.”
Hyman agreed: “At £12.75m it is almost guaranteed that he has bought the stock to keep House of Fraser going. It will become an in-house brand like Firetrap, to try to revive the business.”
However, several brand sources supported Ashley’s acquisition.
“It’s a very good casualwear brand that Ashley has shrewdly taken off the market so he can put it in HoF and wherever he wants to put it,” said one menswear source.
“The cash injection is a good thing. Jack Wills needs a focus, and this is what he intends to do with it.”
Another supplier said: “Mike Ashley is a very astute retailer. He knows a good thing and if I had the money I would do it as well. It’s a good purchase for him.”
Drapers has contacted Sports Direct for comment.