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Why Mike Ashley can’t sell Newcastle United

5 years ago

Mike Ashley will be a busy man, currently, dealing as he is with crises of one sort or another, not all of them self-generated, wherever he looks.

He’s got a lot more money than I have, and is much more successful than I will ever be, and is very powerful in his rather horrid little world, and he is apparently softly spoken and charming when not being ruthless.

But even such a successful man must be looking with alarm at developments on the other side of the Atlantic. I’m not talking about the possibility of Hillary Clinton being unable to overcome arch dealmaker and dubious billionaire Donald Trump.

A Trump presidency might be just the job from Ashley’s point of view.

No, I’m talking about the sudden descent into insolvency of the sports retailing giant Sports Authority. This is a company that has been going for the best part of a century, and dominates the market in America. True, it has never made much effort to be a global concern, as the American market has been big enough. But it provides an interesting perspective.

Sports Direct claims, almost plausibly, to be global, and has more stores around the world than Sports Authority has in the States.

But in terms of market dominance, Sports Direct in the UK and Sports Authority in the States are gorillas of comparable size.

And now Sports Authority has gone bust. Of course we all know about Sports Direct’s current problems, which are related to publicity tirelessly generated by The Guardian’s highly effective reporting.

We all know about Ashley’s panicky tactical manoeuvres, like suddenly opening up his Shirebrook warehouse to local MPs, such as Dennis Skinner, whom he has ignored for years, failing to answer many letters and not taking their calls. He is promising to put up workers’ wages, and denies there are as many zero hours contracts as has been reported.

But what about the things he isn’t doing? The things, I would argue, that he cannot do, for reasons of temperament and disposition?

What about his unchanging business model, which he implements with ironclad certitude at Newcastle United?

For latecomers to this debate, the key features of Ashley’s modus operandi are buying cheap, pile ’em high, sell in bulk, while reducing costs, investing only when necessary, and making assets sweat.

Costs can be reduced, of course, by making a personal loan to your company, rather than using banks. It also concentrates power in Ashley’s hands. And now Sports Direct has stopped doing this, apparently because of ‘criticism’, of which there has been a lot.

But Sports Direct is 55% owned by Mike Ashley himself. This is a decision he would have made himself. Ashley would not have made a change like this just because of pressure and criticism.

The background to this decision is that, in the last three months, Sports Direct has lost 40% of its value. This is a paper loss to Ashley himself of almost a billion quid.

Regular readers will be aware I have long been convinced Ashley has been trying to sell Newcastle United, but just can’t. I remain of that view. Other clubs can be sold, and there are buyers out there, but Newcastle is a basket case, and we are likely to be relegated.

That has been the problem.

Sound businesses can brush off criticism. Gerald Ratner fingered the Achilles heel of his business thirty years ago when he said the quality of his products was ‘crap’.

Newcastle United is crap too. Ashley is getting criticism because his businesses are being revealed as crap. It is possible that we are seeing a momentous slide down a slippery slope. Not just for Sports Direct, but for Newcastle United too.

Next up comes the fire sale. We are used to those at Sports Direct.

But expect those ‘Everything Must Go’ signs festooning St James Park sometime soon.


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