The Daily Telegraph
Flawed genius Ashley was a great British swashbuckler
The Frasers Group tycoon stuck doggedly by bricks-and-mortar retail – the business world may not see the likes of him ever again
One of the pillars of the City’s investment mantra is that poor governance destroys shareholder value. Yet Mike Ashley probably has a thing or two to say about that as he prepares to hang up his tracksuit and trainers for good. The maverick retail tycoon departs having ruffled more feathers than most business figures with his disdain for corporate convention. Yet the market cap of his Frasers Group empire has multiplied by two and half times under his guidance. At the same time, arch-rival JD Sports has come unstuck too.
As he steps down from Frasers’ board, Ashley has one last snub for the stuffy traditions of the Square Mile. The future of the near-£4bn company he created from scratch now rests in the hands of son-in-law Michael Murray, who at just 32 – and having been promoted from the role of Frasers’ property consultant – possesses little, if any, obvious qualifications needed to run a FTSE 100 company.
It is possible of course that he will turn out to be an inspired choice. There are signs of promise, with Frasers’ share price climbing by a third in the 14 months since Murray took over, though analysts largely attribute this recent success to reduced competition and the closure of some of the worst stores it inherited after the rescue of House of Fraser.
Whatever happens, accusations of nepotism are unavoidable. Murray hadn’t even spent time getting his feet wet as a non-executive director. It is a final two fingers to an establishment that Ashley made no attempts to hide his disdain for from the beginning.
His dismissal of fund managers as “cry babies” after a profit warning halved the Sports Direct share price shortly after its 2007 listing set the tone for nearly a decade and a half of testy relations with institutional shareholders.
Among his biggest critics were the so-called proxy advisers, who counsel major investors on how they should vote on key issues, and corporate governance mavens, who hold greater sway than the traditional stockpicking fund managers themselves these days.
Their ire was understandable at times. Possessed with a restless energy and an obvious affection for rabble-rousing, on occasions Ashley seemed to be picking a fight for the sake of it, even when the reputation of the company he controlled suffered.
This apparent willingness to engage in self-sabotage left many investors tearing their hair out.
Perhaps he felt he was simply giving people what they expected. Though Ashley never tried to hide his disdain for the men in suits, there was a sense that certain elements of the City looked down their noses at him from the start.
Others such as hedge fund trader Crispin Odey and Schroders saw past the bravado and the antics, and have been unwavering in their backing. They saw Ashley’s maverick side as key to Sports Direct’s astonishing early success and were among a select bunch that were prepared to accept his flaws as the price for perceived entrepreneurial and retailing brilliance.
However, their faith has been stretched by a deal-making urge that often appeared to lack commercial logic and suffered from a distinct scatter-gun approach.
At one stage, there were questions about whether the company’s finance department had the manpower to keep up with the acquisition spree after the publication of its accounts was delayed yet again.
Analysts at Peel Hunt likened it to “trying to coach the England football team whilst running the netball, the tennis and the chess team as well”. There was certainly little to suggest that Ashley was close to turning the retailer into the modern fashion house that he has long dreamt of. Sports Direct stores have at times resembled a glorified bring-and-buy sale.
And yet Frasers continues to confound the doubters. Though the share price has lost steam in recent weeks, as recently as July it looked like it might burst through the £10 barrier for the first time on the back of a record-breaking year.
The company posted pre-tax profits of £344.8m for the year to April, compared with a £39.9m loss the previous year.
This was achieved in the face of challenges with supply chains, the current cost of living crisis, and the “archaic business rates regime”, it pointedly said. Profits for the current year are expected to soar again, to somewhere between £450m and £500m.
It is worth noting too that Ashley’s faith has never wavered. In April, the company announced another multimillion-share buyback, this time worth £70m, having handed back around £300m to investors since the previous May.
And as Ashley steps down for good this time, he has pledged a further £100m of funding on the same terms as the £930m that Frasers borrowed from its banks at the end of last year.
Ashley may prove to be the last of his kind – an unashamedly old-fashioned retailer who stuck doggedly with bricks and mortar retail despite the rise of Amazon, and a shift to online among big global names such as H&M and Zara owner Inditex in fashion, and Nike in sport.
A more pressing question is whether there is even room for the sort of swashbuckling entrepreneurial spirit that Ashley epitomises amid the conformity that investors now obsess about today. In a world of box-ticking and red tape, there is a great risk that the City doesn’t just become a more boring place, but a much poorer one too.
‘There was a sense certain elements of the City looked down their noses at him’