Debenhams partnership in peril as Mike Ashley 'does a Ratner'

Billionaire behind Sports Direct jeopardises retail alliance as he describes the department store as 'crap'

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The Independent Online

Mike Ashley has launched a bizarre attack on Debenhams, calling the business “crap” even though he presides over a partnership between the department store group and Sports Direct, his retail empire.

The billionaire businessman also controls a 10 per cent stake in Debenhams through Sports Direct and is in talks to open several more concessions in the department stores after a successful trial was launched this year.

But while speaking to City analysts at the unveiling of Sports Direct’s full-year results, Mr Ashley, the company’s largest shareholder and executive deputy chairman, was asked his thoughts on Debenhams.

He said: “Crap… the Debenhams share price would be 200p if they had decent brands to sell rather than made-up own-labels.”

The shares closed at 89.70p.

The Sports Direct chief executive Dave Forsey had said earlier in the day that he was looking forward to having eight concessions in Debenhams by next spring, as the retailer aims to fill excess space with outside brands.

However, Mr Ashley’s “Ratner” moment could leave the partnership in tatters as Debenhams hit back at his comments.

A spokesperson told The Independent: “We have a fantastic choice of brands in Debenhams and one of the biggest attractions for our customers is ‘Designers at Debenhams’... showcasing internationally renowned British design talent.”

The spat came as Sports Direct also admitted that its failed takeover of another high street department store, House of Fraser, would hit profits by around £60m.

Managers had previously set a profit target for a lavish employee bonus scheme of £480m, but with the takeover setback, this was considered “unreasonably challenging” and has now been cut to £420m. However, the three-year target remains unchanged.

The company insisted that this did not amount to a profit warning, because the targets for the bonus scheme were different to the target guidance given to the market.

Despite being unable to close a handful of deals, including the House of Fraser one, Sports Direct still managed to grow sales by 4.7 per cent to £2.83bn, with pre-tax profits rising by 30.1 per cent to £313m in the year to 26 April.

The growth was courtesy of 23 new stores in the UK, nine across Europe and extensions to a handful of other stores. Mr Forsey added that fitness and running gear had sold particularly well, saying: “The sports division is the powerhouse of the group, and across the UK and Europe we’re making good headway.”

Several deals are still on the table, according to the company, and its appetite for a UK takeover is still strong.

Mr Forsey said: “We’re still in many discussions with prospective partners … we just haven’t managed to get a few over the line.”

The company also hit out at what it called “unfounded and inaccurate” reporting of its use of zero-hours contracts – 75 per cent of staff are on the controversial pay arrangements – after years of complaints by campaigners and politicians that Sports Direct has used the contracts excessively.

The Independent revealed in March that the company accounts for one in five of all employees hired on  zero-hours contracts in the British retail sector.

On the imposition of a Living Wage of £9 an hour from 2020, Mr Forsey said he was not concerned and that he expected the additional  expense to increase the current wage bill of £300m by between 1 per cent and 2 per cent.