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Too much power? Industry reacts to Mike Ashley appointment

Industry insiders have largely welcomed the fact that Mike Ashley will now be held responsible in a more executive role following the shake-up at Sports Direct, but some have raised concerns over his “tighter grip” over the firm.

Sports Direct HQ

This morning it was announced that Sports Direct chief executive Dave Forsey has resigned after 32 years and been replaced with immediate effect by Ashley, the company’s founder and majority shareholder. The move follows months of mounting criticism of the firm’s working practices and corporate governance.

Industry analysts believe Ashley needed to step in to show he is taking full responsibility for the business.

“Clearly the issues surrounding accountability and working practices have caused an internal shakeout and the calls for Mike Ashley to have a more executive role have been answered,” says Peel Hunt’s retail analyst Jonathan Pritchard.

“The management change is interesting but ultimately the shares will succeed or fail on the implementation of the new strategy. Moving away from ‘pile it high, sell it cheap’ and becoming more respectful of third-party brand equity will take time and cultural change but it’s the only way,” he adds.

Independent retailer Nick Bubb says Forsey has done the “honourable thing” and fallen on his sword.

“In these circumstances, the usual debate is whether he jumped or was pushed, but, even though [Forsey] was Mike Ashley’s right-hand man, it looks like he has simply done the honourable thing, given the recent criticisms of him in the Sports Direct working practices report and the likely outcome of the corporate governance review.

“Perhaps inevitably, as he obviously really runs the show, the deputy chairman, Ashley, is stepping up to the plate to succeed him”.

Another retail source agrees: “Forsey screwed up, the warehouse was his responsibility as CEO and he took his eye off the ball.”

One headhunter agrees that Forsey is taking a hit for his failings at the business: “Bottom line is, as CEO, Forsey has been responsible for both the great business and the bad PR.”

However, independent analyst Richard Hyman says Forsey’s departure is a “huge blow” to the business.

“A significant part of Sports Direct’s DNA will leave with Dave Forsey. He’s been there from day one and has always been the calm, measured, approachable leader at the top. As for Ashley becoming CEO, job titles are just packaging. Mike has been the CEO of the business since it began, with Dave keeping all the plates spinning and executing plans. It’s a damaging departure.”

Another source says the shake-up might be an opportunity for the business to bring in a fresh, well respected leader: “I don’t think with Mike Ashley as deputy chairman that any new CEO would have free reins, but perhaps now is the time for the company to bring in a good trader, someone that can grow the business but has a better public face, someone that the industry respects.”

However Simon Poole, managing director of menswear brand and retailer Luke, which works with Sports Direct, says Ashley is one of the best traders in the industry: “Why this questioning about [Ashley’s] new role? He’s one of the most successful garment traders in the last decade. Like him or not you have to respect what he has built. People have choices on who they work for or who they do business with, no one is forcing people to work in Shirebrook or to work with Sports Direct.

He adds: “It’s a very professional outfit, the biggest in the industry. They run tight and lean like all good logistics companies and that’s what they are in essence- one of the biggest in the game.”

Joshua Raymond, market analyst at XTB.com, questions whether Ashley is the best man for the chief executive position as it will increase his power over the business.

“The fact Mike Ashley immediately assumes the CEO role will keep a laser focused attention on the firm’s ability to recover from the crisis. This point is even more pertinent given much of the concern focused on Ashley’s power grip on all aspects of the retailer, a grip which has just become even stronger.”

This sentiment was echoed by another recruitment source who said Sports Direct’s CEO “wasn’t the issue”.

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