Life with Mike Ashley

Sports Direct has become one of Britain's best-known retailers, but not without some controversy along the way. James Thompson reports from inside the company's unconventional Derbyshire headquarters

James Thompson
Saturday 19 November 2011 01:00

The helicopter in the car park is the first clue that the fortunes of the former Shirebrook colliery in Derbyshire have changed since Sports Direct, the UK's biggest sportswear and equipment retailer, began calling it home in 2005.

The helicopter belongs to Mike Ashley, the retailer's colourful founder and deputy executive chairman, who also owns the football club Newcastle United.

Aside from such trappings of wealth, the real story is that Shirebrook, which employs 1400 staff, is the engine room for the retailer's network of UK stores, head office functions, distribution centre and a state-of-the art training facility, the Nike Academy.

The site's huge 525,000 sq ft warehouse – which is being extended by 300,000 sq ft to meet increased capacity at its nearly 400 UK stores – is impressive in its scale. But Shirebrook's most eye-catching building is the Nike Academy. In fact, this is the only such academy globally that Nike has established with an independent retailer.

The swanky facility, which opened 16 months ago, is a world away from the traditional image of Sports Direct as a bargain basement retailer, bearing a closer resemblance to the interior of an elite US athletics academy.

The foyer of the academy has pictures on the walls of top sport stars, including Serena Williams, Cristiano Ronaldo and Rafael Nadal, as well as a small stone statue of the Greek goddess of victory, Nike. The site is used for all Sports Direct's staff training and is inhabited by five full-time "Ekins" – who know Nike backwards. The Ekins teach staff about new products, sports physiology and how to engage with customers. If all this sounds a bit cheesy,

it is not, as nearly 1,600 of Sports Direct's part- and full-time employees have passed through the academy since it opened. Staff also study online and take a web-based test to "graduate", which typically adds up to about 30 hours. They can also take a post-graduate course.

Such an investment shows how Sports Direct is putting its money where its mouth is to shed its "pile 'em high, sell 'em cheap" image. Dave Forsey, the retailer's softly-spoken chief executive and Mr Ashley's right-hand man since 1984, says: "Maybe we have not got the message out there ourselves and that has perhaps been a criticism of us. It is a perception that goes back longer than the float [at 300p in March 2007]."

He is also effusive about the impact of Sports Direct's share bonus scheme, particularly on staff retention. In July, the retailer shared £87.5m worth of shares with more than 2,000 employees. This represented an average payout worth £43,860 – more than double the standard wage of £20,000 – after Sports Direct exceeded its target of underlying profits of £195m for the year to 24 April. Staff will receive some shares in August 2012 and the rest in 2013.

Mr Forsey said: "It has been the absolute game-changer in terms of the business model. What we really believe has driven the performance is the introduction of the first and the second [share bonus] scheme." Before the scheme was introduced in 2009, Sports Direct had staff turnover of 29 per cent, but this was slashed to 16.9 per cent in 2010-11.

Sports Direct's confidence in its growth was highlighted in the summer when it unveiled a new four-year bonus scheme. It plans to issue a maximum award of 34m shares to about 3,000 employees, if it hits underlying profits targets each year until a final goal of £300m in 2015.

Certainly, its fortunes are different to those of rival JJB Sports, which had pre-tax losses of £66.5m for the 26 weeks to 31 July. In contrast, Sports Direct said last month it was confident of meeting its guidance for underlying earnings of £215m this year.

JJB is likely to be aware of Sports Direct's latest store concept at Shirebrook, which is the blue-print for its new and retrofitted shops. The 25,000 sq ft shop, which is open to the public, has a spacious layout and showcases its latest stores-within-a store. These include the retailer's "She Runs He Runs" area, and a plethora of brightly-coloured football boots in "The Boot Room". These are based on two collaborations with the Sweatshop and Soccer Scene chains.

Of course, since Mr Ashley founded Sports Direct in 1982, the company has acquired a large number of brands, including Lonsdale, Slazenger, No Fear, Dunlop and Everlast. This brand ownership model –which gives Sports Direct better margins and the flexibility to licence its products globally with other retailers, such as Sears and K-Mart selling its Everlast brand in US – has been integral to the UK chain's success.

However, Mr Forsey is keen to stress that Sports Direct is anything but a one-man band. He says: "Mike is an integral part of the business and is acknowledged as a retail genius. [But] there are lots of people who have built this business over 29 years and we are extremely proud of what we have built."

Until the last year, however, Sports Direct has rarely been far from controversy and has been involved in a number of regulatory investigations, such as over stores bought from JJB.

But the company has been cleared of any wrongdoing each time and this has helped its shares jump by 45.5 per cent this year to 233.1p.

That said, Mr Forsey says the current conditions for UK consumers are the "toughest" he has seen in his 27-year career at Sports Direct.

But, without referring to other chains, he says: "For the more challenged retailers, it [downturn] highlights them more quickly and for the stronger ones it creates an opportunity that can enable them to prosper even in tough times."

Sports Direct, which has 89 stores overseas in eight countries, looks well placed to benefit from next year's European soccer championship and the London Olympics. Mr Forsey said: "We believe that a European Championship, plus the Olympics, is equal to a [football] World Cup."

However well the UK teams perform at these events, Shirebrook is likely to remain in the retail sector's winning circle for the forseeable future. This is a prospect few miners could have envisaged when the colliery closed in 1993.

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