In September 2016, Sports Direct made the bold and, perhaps at the time, bizarre claim that within the next four years shoppers will see it as ‘the Selfridges of Sport’, referring to the luxury department store.
It seemed like a bit of a leap for the company, which was, at the time, exposed for its bad working conditions in a government-backed investigation.
The ambition was revealed in a presentation slide at the 2016 AGM with little detail about how it planned to achieve the goal simply saying that “it will be underpinned by a ‘360-degree review’ which will take place over the next 12-months.”
Within this review, the company intended to look at, amongst other things, its working practices and employment model as well as corporate governance and its corporate reporting and communications strategy.
Of the latter, Sports Direct said that it was looking to be “very open”, another surprise given its lack of transparency on matters such as chief executive Mike Ashley’s brother in-law’s firm being used for its international deliveries.
The announcement resulted in many jibes being made at its lofty ambition to emanate one of the UK’s most well-known and respected retailers, but the desire for Sports Direct to focus on rebuilding its brand was desperately needed.
Rather than investing in marketing activity, it had simply hoped that a ‘stack it high, sell it cheap’ retail model would be enough of a draw for today’s consumers but it was clear that this strategy has not been viable for some time with profits falling 20 per cent in 2015-16.
Two years on and the latest set of results show an even greater reduction in profits (in part due to its investment in Debenhams) and yet, amongst all this there are signs that things might be changing.
I’ve sat in many meetings with this goliath over the years and talked to many different buyers as the business has evolved. Its usually the best time to take the pulse of the business. Get the feeling on the inside. Check the mood. And my meeting last month was no different.
I remember ten years ago when the share price had fallen massively from its float price and was sitting at 32p. The outside world (in particular the city) had not a good word to say and yet the mood inside the camp was buoyant.
A new warehouse was being built. Online sales were growing massively and the pile it high sell it cheap strategy was starting to pay off. How I wish I’d listened to myself and bought a few shares then after the share price peaked at £9.22 in 2014.
I’ve been conscious of this ever since and always tried to pick up signs when in Shirebrook to see if things have changed. And maybe they have.
When reviewing a certain product category recently with the buyer he made it clear that there was no place for in house/own brands at the entry level price points when they had already demonstrated that removing these and selling the branded product at a higher price had not had a negative effect on the trading numbers and had, in fact, brought in more cash margin.
Music to the ears of all the sports brands that make the regular trek to Derbyshire.
But this one piece of anecdotal evidence is not enough to represent a turnaround.
So I left the meeting feeling confident regrading the prospects of this particular brand and that the trading up message had finally reached the key generals – the buyers.
Directly across the road from the SDI HQ was, perhaps, the embodiment of this new more up market approach.
There before my very eyes were three new, shiny sports stores. Owned by Sports Direct, part of the Sports Direct stable, but featuring new branding;
I stepped into the TRI UK Store and was immediately impressed with the product range and brands on show.
20,000 square feet of premium running, swimming and cycling brands all under one roof with an in-store pool, Guru bike fit system, a Mizuno running fit solution, brand showcases featuring the likes of Castelli and a range of bikes and price points that one would struggle to find in the UK.
I chatted with the staff – they were polite and knowledgeable and the store layout and design felt modern, interactive and relevant.
Was this really part of the Sports Direct stable?
I wandered next door to the The Pro store – a showcase of specialist outdoor gear, plus top-of-the-range equipment for equestrian pursuits, fishing and climbing.
Similar in size to the Tri UK store it even boasts two climbing walls to test out kit, as well as a treasure trove of top-brand climbing and walking wear, whether you be a seasoned explorer or casual weekend-rambler.
If I was being slightly critical it featured more “in house” brands than the Tri UK store (but I guess this will come) but the environment and feel of the store is certainly up market.
My final destination was the Pro Golf store next door and, again,the theme continued.
Quality brands, great presentation – a Selfridges environment. And there you have it.
We are all acutely aware of the challenges that face our High Street but are also aware that, with the right environment, consumers are still willing to travel to immerse themselves in an interactive retail landscape.
It will take time to close the non performing stores in the Sports Direct group and to roll out new store fits and new store concepts, however, the early signs are that the push to become more upmarket might have begun.
The share price sits at around £3.25 as I write this. Its tempting.