Published On: Tue, Oct 15th, 2019

Mike Ashley: How Sports Direct owner showcased brutal tactic to ‘finish off’ rivals | Personal Finance | Finance

Mr Ashley has turned Sports Direct into one of the largest sports-good retailers in the country, with almost 700 stores worldwide. The leisurewear CEO has also expanded his empire and taken over companies such as House of Fraser and Lillywhites, developing a reputation for buying out retailers who are on the cusp of going into administration and helping them return to their former glory.  He is also the controversial owner of Newcastle United FC and is estimated to be worth approximately £2billion.

This week he called for an inquiry into the dominance of the brands, Nike and Adidas.

The statement came after Nike told Sports Direct it will stop sending the retailers its products over the next two years, with the US brand claiming Mr Ashley’s sales methods “no longer aligned” with its own strategy.

Mr Ashley has expressed concerns Adidas might soon follow. The two companies create £50billion revenue every year between them.

Sports Direct’s official statement released on Monday said: “The sports industry has long been dominated by the ‘must-have’ brands such as Adidas. 

“These ‘must-have’ brands hold an extremely strong bargaining position vis-a-vis the retailers within their supply networks and use their market power to implement market wide practices aimed at controlling the supply and ultimately, the pricing of their products.”

Consequently, the statement explained, established brands like Nike and Adidas hold a great deal of market power. 

It also said: “Sports Direct believes that the industry as a whole would benefit from a wide market review by the appropriate authorities in both the UK and Europe.”

A 2014 Reuters article described how this direct approach with other companies within his industry is a tactic Mr Ashley has employed before.

Reporter Neil Maidment said: “Ashley is a billionaire whose unconventional image and management style and penchant for a quick deal, have earned him admirers, as well as critics, along the way.” 

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The reporter claimed: “Despite owning 12 percent of JD, Ashley’s firm is upping competition.”

Mr Maidment said: “The rise of his business has been fast and at times brutal.”

Liberum Capital’s retail analyst Sanjay Vidyarthi explained: “[Mr Ashley has] been a tremendous disruptive influence. The competition really just hasn’t known how to deal with him.”

Mr Ashley is believed to have a “disregard for convention” and often hits the headlines for his quick high-profile business deals.

Mr Maidment also spoke to an anonymous banker who said: “He’s a brilliant tactician. Think about a chess game … Mike’s opening moves are brilliant, and it takes the audience a very long time to actually work out what he’s done.”

He went to court in 2017 after a former banker Jeff Blue and one of his own colleagues claimed Mr Ashley had agreed to pay him £15million if Sports Direct’ shares increased to £8. They were both ‘binge-drinking’ in a London pub when the deal was proposed, five years before Mr Blue took the tycoon to court when the shares doubled but he was only paid £1million.

He denied Mr Blue’s allegation and said it was “nonsense”. The sportswear tycoon famously defended himself by saying: “I like to get drunk, I’m a power drinker.”

Mr Ashley later won the case.

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