Dan Thomas looks up at the rain clouds hovering above St. Paul’s cathedral in London and then smiles approvingly at the two golf umbrellas he’s just bought for £5 ($8) from a branch of Sports Direct. (SPD)
The 28-year-old electrician from Essex said the store chain controlled by Mike Ashley, the owner of Premier League soccer club Newcastle United, is his initial port of call when he’s looking for sporting goods. The reason: Price.
“I’ll always have a look in Sports Direct first because they’re cheap,” said Thomas, who usually buys T-shirts for use at the gym from the store. “The umbrellas were more expensive when I looked on EBay.”
With prices luring thrifty customers, Sports Direct International’s stack-it-high-sell-it-cheap strategy helped push its biggest competitor into bankruptcy this week, while manufacturers Nike and Adidas have the products they spend millions of dollars marketing sold at a discount.
In stores located everywhere from dilapidated provincial retail parks to prime London shopping streets, Sports Direct sells everything from Lonsdale boxing gloves and Slazenger cricket bats, brands owned by Ashley, to Adidas sneakers and replica Manchester United soccer shirts made by Nike.
Logos of the world’s largest sporting-goods companies often get displayed in stores that resemble a yard sale, according to Bryan Roberts, a director at Kantar Retail in London. “It’s not the most attractive proposition in terms of in- store experience, but it’s been tremendously effective,” Roberts said in a telephone interview.
Sports Direct, which former squash coach Ashley founded by opening an eponymous store Mike Ashley Sports in 1982, is now the UK’s biggest sporting goods retailer, with almost 500 outlets and 19,000 employees.
It increased underlying profit by 14 per cent in the 53 weeks ending April 29 to £109.1 million, while sales rose 13 per cent to £1.8 billion, the company said in a statement to the stock exchange on July 19.
Its shares have jumped 79 per cent this year before today, compared with the 6.5 per cent gain for the benchmark All-Share Index Nike has fallen 0.8 per cent, while Adidas is up 30 per cent. Sports Direct shares rose 3.9 pence to 386.7 pence at 11:16 am in London.
JJB Sports Plc (JJB), the company founded by another soccer club owner, Dave Whelan of Wigan Athletic, on October 1 announced it was eliminating 2,200 jobs after the business went into administration, a way of avoiding outright bankruptcy. Sports Direct is acquiring 20 stores and JJB’s website, according to a statement from administrator KPMG LLP on October 1.
A key battle front in the competition among UK sports retailers has been in the sale of replica soccer jerseys.
More official shirts are sold in the UK than anywhere else in the world, according to Andy Anson, who runs Kitbag, an online sporting-goods seller. Sports Direct discounts shirts to the point where the current England national team uniform made by Nike-owned Umbro is on sale for £16.49. That’s forced Nike and Adidas, the two largest brands in soccer, to respond, Anson said.
“They have been taking action to protect the premium nature of the replica shirt product,” Anson said in a telephone interview. “Across the major brands, wholesale prices and recommended retail prices have been pushed up. The aim is to try and slow down the discounting, though the jury is very much out on the success of this strategy.”
Spokespeople at Nike and Adidas declined to comment. A request to speak with Ashley, who became deputy chairman when Sports Direct listed on the London Stock Exchange in 2007 and rarely gives interviews, was declined.
‘Out of nowhere’
Forbes magazine in March described the 47-year-old as a “reclusive tycoon” with a fortune of $2.5 billion. Roberts at Kantar Retail said Sports Direct “virtually came out of nowhere” to take control of UK sporting-goods retailing.
While he doesn’t speak publicly, Ashley’s takeover of Newcastle United months after pocketing $1.8 billion from Sports Direct’s initial public offering thrust him into the spotlight. The new owner started out by sitting among supporters, drinking beer and wearing a replica black-and-white Newcastle jersey. He tried to sell the club twice after angering fans by the way he ran the team, which was relegated to the second division following the 2008-2009 season.
With a return to the Premier League and qualification for European competition, Ashley sits in the directors’ box in a stadium he rebranded the Sports Direct Arena last year.
For Nike and Adidas, the relationship with Sports Direct is complex. Both Adidas and Nike have office space inside Sports Direct’s headquarters in Shirebrook on the outskirts of Mansfield, a former mining area in central England. Yet while Ashley’s retailer is their biggest customer in the UK, premium stock is often withheld until the company provides assurances it will be displayed prominently in stores that are uncluttered, according to two people familiar with negotiations between the companies. They declined to comment publicly because the talks are private. Sports Direct spokesman Jonathon Brill also declined to comment.
The retailer has started a “He Runs, She Runs” campaign at some of its stores to tap into a surge in the number of casual runners in the UK. Some pricier running apparel from Nike, Adidas and Japan’s Asics Corp. are in three specific areas, though typically with discounts of more than 30 per cent. With about 75 per cent of Nike and Adidas’s UK retail sales generated by Sports Direct, JJB and JD Sports, a fashion- led sports retailer, the demise of JJB strengthens Ashley’s hand over the suppliers, Roberts said.
Sports Direct controls 18.4 per cent of the UK’s sporting- goods market, according to market researcher Verdict.
“They are beyond a shadow of a doubt now the biggest customer that a lot of these suppliers will have in the UK,” Roberts said. “There will probably be more dancing to the tune called by Sports Direct.”
On a recent visit to a Sports Direct store in central London, less than mile away from Nike’s flagship outlet in Oxford Circus, stock is pouring out of the door. Next to a floor-to-ceiling poster offering 70 per cent off sneakers bearing the logo of Sports Direct-owned Lonsdale is a bucket of umbrellas made by Dunlop Sports, another Ashley brand, and discounted to £2.99. Above the door are stickers showing Nike’s swoosh and Adidas’s three stripes.