Comment: Competition in sports retail

Mike Ashley’s Sports Direct was the market leader in its category last week and remains so this week following the drawn-out demise of JJB Sports.

The thing that has changed is that Sports Direct has picked up 20 of its defunct rival’s shops, along with stock, some brands and property. Just last week, Sports Direct was also potentially interested in another 40 JJB shops, subject to completion approval from the Office of Fair Trading (OFT).

Sports Direct’s decision not to strike a deal on the larger number of stores was influenced by the likelihood of burdensome dealings with the OFT, sources familiar with the situation say. The game was not worth the candle.

You have to ask whether the competitive landscape would have changed any more substantially had Sports Direct been able to buy more stores. The next question is whether the traditional approach taken to competition issues – in which store numbers are frequently a big factor – is past its sell-by date. That must surely be the case, especially when one competitor has gone bust.

As multichannel retail gathers pace and online giants such as Amazon grow, a focus on stores is also insufficient in gauging the real competitive landscape.

Sports Direct prompts differences of opinion. It’s condemned by some as a pile-it-high, sell-it-cheap bazaar. But the way it overtook JJB is testament to its retail focus.

One of the intriguing aspects of the JJB deal is the inclusion of a distribution centre, and Sports Direct may well use it to support its burgeoning ecommerce business.

Online is seen by analysts as one of Sports Direct’s big growth opportunities, both at home and as it expands internationally, so JJB’s warehouse might add far more to the top line than the shops acquired.

Sports Direct hosted investor visits this week and brokers seem bullish on the stock. The retailer remains the unchallenged market leader and, as it leaves the wreckage of JJB in its wake, there seem few reasons to doubt that growth will not continue.