How is Mike Ashley making money?
Discussion
I understand how he makes money from Sports Direct.
But I was in one of his House of Frasers last week and it was EMPTY. It looked like a jumble sale with all the doors locked. I was the only customer I saw and the staff in the cosmetics department were practising a dance routine. I kid you not.
He recently bought Gieves and Hawkes on Savile Row and no one will go there for a bespoke suit now that Ashley owns it. That's assuming that they even DO bespoke now, which I suspect is unlikely.
Is he really making money from his acquisitions, or are there smoke and mirrors in play?
According to this article:
"Sales at the group’s premium division, which includes Flannels and House of Fraser, rose 5.7%, before acquisitions, but the division sank to a loss of £100,000, from a £10.5m profit a year before, after losing business rates relief and taking a £19.8m hit from store closures."
My local HoF is plastered with 'SALE', and the front window manequins are wearing 'SALE' sweaters - the usual Mike Ashley nonsense. Shop's pretty empty, and the cashiers seem downbeat. One of them read me some sort of script about only being allowed to get store credit if I return the clothes I was buying. Not sure I'd trust the shop to still be trading if I return!
An increasing number of the 'designers' are diffusion lines or 'urban' brands. Pretty much all their suits/shirts are branded 'without prejudice' and look ridiculous.
However, it still has some good concessions which I sometimes buy from. I'm no more likely to leave empty handed as when I go to John Lewis or M&S (although I increasingly end up leaving empty handed because menswear is getting woeful - where the hell do men get modern smartish discreet decent quality clothes from???).
"Sales at the group’s premium division, which includes Flannels and House of Fraser, rose 5.7%, before acquisitions, but the division sank to a loss of £100,000, from a £10.5m profit a year before, after losing business rates relief and taking a £19.8m hit from store closures."
My local HoF is plastered with 'SALE', and the front window manequins are wearing 'SALE' sweaters - the usual Mike Ashley nonsense. Shop's pretty empty, and the cashiers seem downbeat. One of them read me some sort of script about only being allowed to get store credit if I return the clothes I was buying. Not sure I'd trust the shop to still be trading if I return!
An increasing number of the 'designers' are diffusion lines or 'urban' brands. Pretty much all their suits/shirts are branded 'without prejudice' and look ridiculous.
However, it still has some good concessions which I sometimes buy from. I'm no more likely to leave empty handed as when I go to John Lewis or M&S (although I increasingly end up leaving empty handed because menswear is getting woeful - where the hell do men get modern smartish discreet decent quality clothes from???).
List of brands under the Fraser Group here:
https://frasers.group/brands
Amazing how many well-known brands he has now under the group, although I have to admit I’m fairly sceptical about whether the quality of the product is compromised/‘value-engineered’ once under M.A’s ownership.
He certainly seems to still have faith in physical shop-front retail though. 808 stores across the Uk. £340m profit pre-tax in 2022. His clout/leverage with shopping centre/high street landlords must be fairly strong.
More info here https://frasers-cms.netlify.app//assets//files/fin...
https://frasers.group/brands
Amazing how many well-known brands he has now under the group, although I have to admit I’m fairly sceptical about whether the quality of the product is compromised/‘value-engineered’ once under M.A’s ownership.
He certainly seems to still have faith in physical shop-front retail though. 808 stores across the Uk. £340m profit pre-tax in 2022. His clout/leverage with shopping centre/high street landlords must be fairly strong.
More info here https://frasers-cms.netlify.app//assets//files/fin...
The concept of buying failing brands, on a high street that’s currently dying, does seem unusual to me.
But I’m not a billionaire so I assume he’s got better insight into business than I do.
If for whatever reason high streets and brick and mortar do end up having a revival, then he’ll be well placed. Maybe it’s a long game that I just can’t see.
But I’m not a billionaire so I assume he’s got better insight into business than I do.
If for whatever reason high streets and brick and mortar do end up having a revival, then he’ll be well placed. Maybe it’s a long game that I just can’t see.
As others have mentioned he’s a multi billionaire so must do something right but I haven’t bought anything from Sports Direct for at least 5 yrs, all my kids didn’t like what they offer in terms of trainers or football boots and between JD, Sports Pursuit, EBay and a multitude of others, his competitive advantage for me doesn’t exist.
The online offer is or was so poor and returns etc are a nightmare.
Why the hell so I want to go into some now dying town centre, pay for parking, scrape my alloys and encounter hobo’s when I can sit at home and buy on line.
Again given that everything he touches somehow turns to gold I’ll be proven wrong but I’ll not be venturing to a town centre shopping precinct that focuses on Frazers
The online offer is or was so poor and returns etc are a nightmare.
Why the hell so I want to go into some now dying town centre, pay for parking, scrape my alloys and encounter hobo’s when I can sit at home and buy on line.
Again given that everything he touches somehow turns to gold I’ll be proven wrong but I’ll not be venturing to a town centre shopping precinct that focuses on Frazers
The JD and Sports Direct near me are both out of town, decent parking and for kids stuff they work out cheap as chips.
My kids go through trainers, shorts, T shirts etc at a horrific rate so my wife takes them, makes sure everything fits and it’s a fairly painless process.
Decent Nike/UA/New Balance stuff we use the app or websites and wait for deals to pop up and buy online.
Pretty sure I read that Nike don’t supply their better range to Ashley, so he was getting grey imports, but not sure if that’s still a thing?
House of Fraser, I don’t know a single person who has been into one of these for many years, the wife said the same.
My kids go through trainers, shorts, T shirts etc at a horrific rate so my wife takes them, makes sure everything fits and it’s a fairly painless process.
Decent Nike/UA/New Balance stuff we use the app or websites and wait for deals to pop up and buy online.
Pretty sure I read that Nike don’t supply their better range to Ashley, so he was getting grey imports, but not sure if that’s still a thing?
House of Fraser, I don’t know a single person who has been into one of these for many years, the wife said the same.
£340 million profit says that the model is working.
I’m not particularly snobby, but I think it’s a chav play.
At the bottom of the market you have stack-em-high-sell-em-low in Sports Direct.
In the middle of the market you have the aspirational brands where he squeezes quality and margin, but they retain some cachet for years. I still think of House of Frazer as a slightly posher Debenhams, and he does the same with brands like Agent Provocateur which now show up discounted in House of Frazer. It’ll be decades before people work out that these brands are el-cheapo.
Then you have the high end chav play at Flannels where chavs are happy to spend a weeks wages for a CP Company logo.
He knows his audience and serves them well.
I’m not particularly snobby, but I think it’s a chav play.
At the bottom of the market you have stack-em-high-sell-em-low in Sports Direct.
In the middle of the market you have the aspirational brands where he squeezes quality and margin, but they retain some cachet for years. I still think of House of Frazer as a slightly posher Debenhams, and he does the same with brands like Agent Provocateur which now show up discounted in House of Frazer. It’ll be decades before people work out that these brands are el-cheapo.
Then you have the high end chav play at Flannels where chavs are happy to spend a weeks wages for a CP Company logo.
He knows his audience and serves them well.
Edited by globaltraveller on Sunday 30th July 11:07
Mike Ashley is a maverick.
I remember when he opened his very first shop, he is not afraid to take risks, his biggest regret was buying Newcastle United without doing due diligence, but he eventually sold it for a profit.
A financial genius (imo).....Sports Direct stores used to look like jumble sales, go in one now, they are amongst the best run stores in the country with nothing out of place.
globaltraveller said:
£340 million profit says that the model is working.
I’m not particularly snobby, but I think it’s a chav play.
At the bottom of the market you have stack-em-high-sell-em-low in Sports Direct.
In the middle of the market you have the aspirational brands where he squeezes quality and margin, but they retain some cachet for years. I still think of House of Frazer as a slightly posher Debenhams, and he does the same with brands like Agent Provocateur which now show up discounted in House of Frazer. It’ll be decades before people work out that these brands are el-cheapo.
Then you have the high end chav play at Flannels where chavs are happy to spend a weeks wages for a CP Company logo.
He knows his audience and serves them well.
Buy a cheap but prestigious/formerly prestigious brand. Reduce cost and quality, up volume, sell it to the 90% of fashion buyers who trust and seek-out the label without regard to the quality of the actual garment. I’m not particularly snobby, but I think it’s a chav play.
At the bottom of the market you have stack-em-high-sell-em-low in Sports Direct.
In the middle of the market you have the aspirational brands where he squeezes quality and margin, but they retain some cachet for years. I still think of House of Frazer as a slightly posher Debenhams, and he does the same with brands like Agent Provocateur which now show up discounted in House of Frazer. It’ll be decades before people work out that these brands are el-cheapo.
Then you have the high end chav play at Flannels where chavs are happy to spend a weeks wages for a CP Company logo.
He knows his audience and serves them well.
Edited by globaltraveller on Sunday 30th July 11:07
Beat-up your suppliers and landlords.
And god he’s good at it.
globaltraveller said:
£340 million profit says that the model is working.
I’m not particularly snobby, but I think it’s a chav play.
At the bottom of the market you have stack-em-high-sell-em-low in Sports Direct.
In the middle of the market you have the aspirational brands where he squeezes quality and margin, but they retain some cachet for years. I still think of House of Frazer as a slightly posher Debenhams, and he does the same with brands like Agent Provocateur which now show up discounted in House of Frazer. It’ll be decades before people work out that these brands are el-cheapo.
Then you have the high end chav play at Flannels where chavs are happy to spend a weeks wages for a CP Company logo.
He knows his audience and serves them well.
We have a lot of chavs in this country then, who are making him successful. A look around our local high streets supports your theory.I’m not particularly snobby, but I think it’s a chav play.
At the bottom of the market you have stack-em-high-sell-em-low in Sports Direct.
In the middle of the market you have the aspirational brands where he squeezes quality and margin, but they retain some cachet for years. I still think of House of Frazer as a slightly posher Debenhams, and he does the same with brands like Agent Provocateur which now show up discounted in House of Frazer. It’ll be decades before people work out that these brands are el-cheapo.
Then you have the high end chav play at Flannels where chavs are happy to spend a weeks wages for a CP Company logo.
He knows his audience and serves them well.
Edited by globaltraveller on Sunday 30th July 11:07
Regarding JD Sports, this was their shop in Bury in 1981 opened by ex fireman John Wardle and 17 year old David Makin, both huge Manchester City supporters,
(Not my photo)
JD adopted a different approach, after two years they ditched traditional sportswear and equipment and went down the fashion route.
Makin and Wardle sold out to Stephen Rubin and the Pentland (Speedo) group several years ago in a multi million pound deal and now JD are thriving and have thousands of shops all over the world.
John and David now run Sportsasylum shops.
(Not my photo)
JD adopted a different approach, after two years they ditched traditional sportswear and equipment and went down the fashion route.
Makin and Wardle sold out to Stephen Rubin and the Pentland (Speedo) group several years ago in a multi million pound deal and now JD are thriving and have thousands of shops all over the world.
John and David now run Sportsasylum shops.
As someone who doesn't have a clue who owns house of fraser ( i now do) i actually thought it was a decent place. Massive sales on what i call semi designer brands.
Recently bought some cheap trainers to wear for work, garden etc and ended up buying about 7 pairs as they were so cheap. All decent brands some were enormous reductions. For example under armour running shoes were about £110 and i paid something like £25.
Have picked up other various stuff like hugo boss etc, always well priced.
Recently bought some cheap trainers to wear for work, garden etc and ended up buying about 7 pairs as they were so cheap. All decent brands some were enormous reductions. For example under armour running shoes were about £110 and i paid something like £25.
Have picked up other various stuff like hugo boss etc, always well priced.
Does he have shares in the more premium brands too?
I was in sports direct picking up some gym socks and noticed it had a USC upstairs. Popped up and found two Paul Smith t-shirts for £17 each or 2 for £25. Bargain I thought so snapped them up.
On house of Fraser website bought a Paul & Shark crewneck jumper for about £50, bargain also. Or so I thought. After wearing, washing and ironing the garments were no better than h&m efforts but with some logos printed on.
Have had stacks of P&S stuff and th odd piece from Paul Smith and the difference between the non HoF stuff and the House of Fraser stuff is absolutely night and day.
I was in sports direct picking up some gym socks and noticed it had a USC upstairs. Popped up and found two Paul Smith t-shirts for £17 each or 2 for £25. Bargain I thought so snapped them up.
On house of Fraser website bought a Paul & Shark crewneck jumper for about £50, bargain also. Or so I thought. After wearing, washing and ironing the garments were no better than h&m efforts but with some logos printed on.
Have had stacks of P&S stuff and th odd piece from Paul Smith and the difference between the non HoF stuff and the House of Fraser stuff is absolutely night and day.
NaePasaran said:
Does he have shares in the more premium brands too?
I was in sports direct picking up some gym socks and noticed it had a USC upstairs. Popped up and found two Paul Smith t-shirts for £17 each or 2 for £25. Bargain I thought so snapped them up.
On house of Fraser website bought a Paul & Shark crewneck jumper for about £50, bargain also. Or so I thought. After wearing, washing and ironing the garments were no better than h&m efforts but with some logos printed on.
Have had stacks of P&S stuff and th odd piece from Paul Smith and the difference between the non HoF stuff and the House of Fraser stuff is absolutely night and day.
This is basically the answer to the question. It's a good brand on a crap garment, sold at a price the customer is persuaded is good value at the point of purchase.I was in sports direct picking up some gym socks and noticed it had a USC upstairs. Popped up and found two Paul Smith t-shirts for £17 each or 2 for £25. Bargain I thought so snapped them up.
On house of Fraser website bought a Paul & Shark crewneck jumper for about £50, bargain also. Or so I thought. After wearing, washing and ironing the garments were no better than h&m efforts but with some logos printed on.
Have had stacks of P&S stuff and th odd piece from Paul Smith and the difference between the non HoF stuff and the House of Fraser stuff is absolutely night and day.
I don't know if he has any interests in Paul & Shark or Paul Smith, but if he's selling their clothes I expect he's bought them for an absolute song, and so there's no money left to make the garment any good.
Wacky Racer said:
Sports Direct stores used to look like jumble sales, go in one now, they are amongst the best run stores in the country with nothing out of place.
When you walk into a HoF store, you have the company's own stuff and the concessions. It's a very interesting set up:
You're make-up/beauty concession. You can either supply the stock or have it shipped in via the HoF channels. So for renting the floor space you might pay more for using their distribution network. You need to interview and provide your own staff. Of course you will pay them yourself, and the pay, holiday and pension are off the HoF books. So whilst a store might have 25 assistants many of them will be concession staff.
The key here is that you have to use the HoF tills for your transactions. So HoF know to a penny how successful you are and how they much they can raise your rent the following year. And if a customer brings over stock from other parts of the store, your assistants will have to process those sales. For them it's a win/win.
Most department stores operate in this manner. Even normal High Street staples such as WHSmith have got in on the act with concessions in-store.
You're make-up/beauty concession. You can either supply the stock or have it shipped in via the HoF channels. So for renting the floor space you might pay more for using their distribution network. You need to interview and provide your own staff. Of course you will pay them yourself, and the pay, holiday and pension are off the HoF books. So whilst a store might have 25 assistants many of them will be concession staff.
The key here is that you have to use the HoF tills for your transactions. So HoF know to a penny how successful you are and how they much they can raise your rent the following year. And if a customer brings over stock from other parts of the store, your assistants will have to process those sales. For them it's a win/win.
Most department stores operate in this manner. Even normal High Street staples such as WHSmith have got in on the act with concessions in-store.
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