Mike Ashley: retail raider or high-street saviour?

“The biggest thing that has killed the high street is not the high street itself but the web. Be absolutely crystal clear: the web has killed the high street.” That was the bleak assessment Ashley gave MPs in a combative appearance at parliament, prior to a report into the future of bricks and mortar retailers published earlier this year. "It's not my fault the high street is dying," Ashley insisted.

Since 2008, 34 medium and large retailers have gone into administration, affecting 12,997 stores and 178,576 jobs, according to the Centre for Retail Research. A quarter of those occurred in 2018. More closures are to come: just last week it emerged Philip Green’s Arcadia has earmarked 67 stores to shut, and Debenhams already has plans to close up to 50 stores over the next five years – putting 4,000 jobs at risk.

Ashley has snapped up a number of distressed entities over the last year, including House of Fraser and Evans Cycles. Most recently he’s dangled the possibility of a £61.4 million takeover in front of Debenhams’ board, on the condition that he becomes chief executive.

When the department store announced its £200 million refinancing deal last week, which could see his 29% stake wiped out, Ashley released a characteristically colourful statement: “If there were any justice in the world, the majority of the [Debenhams’] advisers would be put in prison.”

Crumbling walls

But what does he want with the grand old lady of the high street, which started out as a London draper’s shop in 1778?

Andrew Busby, founder of analyst firm Retail Reflections, notes that some of the retailer’s stores are “literally falling apart.” That could be a metaphor for a brand that appears to have lost relevance to modern consumers.

“It is very difficult to second guess as to what Mike’s motivation might be… Is he simply a very wealthy maverick retailer that wants to have more of the high street than Philip Green?”

“The only thing that seems to bind it all together is that he is picking these brands up at rock bottom prices.”

Debenhams has failed to keep pace with change and now its debts are such that any money is likely to be swallowed in keeping it afloat rather than in investing for the future, says Busby. Its back office is typical of a legacy retailer’s IT infrastructure, with the company having failed to really understand digital, he notes.

Could Ashley provide a true transformation strategy? “He hasn’t got any track record with online retailing,” says retail consultant Richard Hyman. “I think the problem with House of Fraser and Debenhams is that these are old fashioned retail businesses whose natural constituency isn’t really there anymore.”

What Ashley can do is keep the life support machine on a bit longer. “If he keeps House of Fraser and X number employees employed for a bit longer, I think that is a good thing. The idea of turning it into Harrods of the High Street is fanciful to say the least.”

Staying open

Hyman estimates Ashley spent £90 million on House of Fraser, acquiring £600 million worth of stock. If so, “there’s every chance he’ll make a large fortune. But beyond that, I’m not sure how much of a plan there is”.

There have been no shortage of headlines about Ashley's business antics over the years – such as the claims made in the 2017 high court case that he would challenge colleagues to extreme drinking competitions that once ended with him vomiting into a fireplace.

But Ashley shouldn’t be underestimated, Hyman believes. “He's very good at what he does." The billionaire from Burnham has also come up with a number of suggestions for MPs on ways to boost the high street – including a web tax on any retailer that makes more than 20% of its sales online. "He’s got a less polished way of articulating some of his ideas. But some of those ideas are quite sensible and deserve debate and consideration.”

It's hard to see how his recent acquisitions form a coherent strategy for long-term survival of the high street.  But in the short term, some of the lights are at least staying on.

Ashley's right – it's not his fault the high street is dying. Whether he can help its recovery or is simply prolonging its death is another question.