The race is on for top spots in sports retail

Throughout history sport has been characterised by deep, bitter and lasting rivalries that have spiced things up for the spectators and caused scandal, intrigue and even bloodshed as adversaries fought to be the best.

Off the field, the world of sports retail is home to no less intense rivalry, which last week was reignited as JJB Sports founder Dave Whelan waded back into the market.

Whelan has come out of retirement at 72 to buy the fitness clubs business and associated stores from his former company. JJB had to offload its non-core businesses to pay down debt as it battles to survive a torrid few years.

No sooner had Whelan entered the frame than he was lambasting business rival Mike Ashley who, he claimed, tried to scupper his deal by writing to landlords to try and persuade them not to deal with Whelan.

One industry source told Retail Week: “Ashley hoped he would be the last man standing. He has gone from the potential of no competitors to having two and an old adversary where there is no love lost.”

Those two competitors are Whelan’s newly formed DW Sports Fitness and the rump JJB. DW Sports Fitness now comprises 51 gyms and associated shops, which Whelan wants to take to 100 and make “serious about sport” once more.

The history of the Ashley-Whelan rivalry stems from a widely reported meeting in 2000 in which several sports retailers including Ashley were present at Allsports founder David Hughes’ mansion to fix the price of football shirts.

When Whelan first saw Ashley he thought he was the gardener and later told him: “There’s a club in the North son and you’re not part of it.”

After that Ashley went to the Office of Fair Trading to report the price fixing and the battle between the business competitors turned increasingly bitter. 

One source says: “They both recognise that they are great businessman and have respect and admiration for each other. Respect for your enemy does not mean that they are not an enemy.”

The game begins

Originally Ashley had started Sports Direct’s expansion mainly in the South, while Whelan’s Wigan-based JJB came from a Northern base. As the two companies grew they started moving into each other’s territories.

At its height JJB had about 430 stores, now down to 250 operational shops, but Sports Direct now has about 429. The pair were often in the same towns, streets and business parks. They battled over premises, brands and prices – particularly when it came to football shirts.

Industry insiders say that the two firms privately admit that they have cost one another millions of pounds in the sportswear battle.

They and the other market leaders swallowed up many competitors over the years including Allsports, First Sport and Hargreaves.

Ashley and Whelan, despite their differences, have similar backgrounds. Both came from very modest beginnings and became sportsmen – Ashley a squash player and Whelan a professional football player, before spotting a way to make money from selling sporting gear themselves.

Each started with a handful of shops and built up their empires to become rich, self-made men. They are undoubtedly talented businessmen, but neither wears kid gloves and their tough reputations have attracted criticism and admiration from the industry at large.

One industry source says that the main difference between them now is how they lead their lives. “At heart Ashley is a guy that loves business but does not want the trappings of the corporate. He is more comfortable in the pub having a laugh with his friends than being in a golf club. Whelan has acquired the trappings of the rich lifestyle.”

He added: “Both have taken hard knocks and know hard graft. They are talented enough both to carve their own niche.”

Now Whelan is once again carving a niche for himself. Talking to Retail Week he says: “Sports retail has suffered in the past 12 months because real sports shops, for people who play sport, have disappeared. Sports Direct is all about cut-price product. JD is strictly fashion. There is no player in the market who is serious about sport.”

He added: “The 51 shops I bought will go back to what JJB was. Whatever equipment you need to play, we will have it.”

A shift away from sports retailing purely based on price will be an important step for both Whelan’s new business and the rump JJB to take.

Standing out

Verdict senior retail analyst Maureen Hinton says that sports retailers must establish a more unique identity to hold and gain market share. “As JD has shown, you really need to be differentiated. If you are just price focused it will be difficult,” she says. “Managers need to find a proposition that stands out.”

Whelan says such a shift would also be welcomed by big sports brands. “It is good for the market if there is a selection and not just cheap brands,” he maintains. “Adidas and Nike spend millions on attracting people to their brands. 12 months ago they were worried that Sports Direct would control all except JD.”

Whelan says that JJB was “ruined” by disgraced former chief executive Chris Ronnie and now needs to “return to its roots”.

Whelan sold his 29 per cent stake in JJB to Ronnie in 2007 for £190m. The retail chain went from an operating profit of £46.4m in the year to January 2007 to being on the brink by the end of last year. One of the biggest problems was Ronnie’s plans to build a lifestyle division, with the acquisition of footwear chain Qube from Sir Tom Hunter in May last year to put together with the Original Shoe Company, bought from Ashley in 2007.

Ronnie’s links to Ashley – he was formerly the Sports Direct tycoon’s right-hand man – were a frequent talking
point in the industry and made some uneasy. It was reported, for instance, that Ronnie accompanied Ashley to a recent meeting with Whelan – to the surprise of the latter – at which the JJB gyms sale was discussed.

The lifestyle division would have lost JJB £15m this year but was placed into administration by the new leadership, Sir David Jones and Peter Williams, who were parachuted in to JJB at the start of the year to co-ordinate a rescue.

JJB’s survival fight is not yet over. In the coming weeks the retailer hopes to persuade landlords on terms of a company voluntary arrangement that would secure a future for a slimmed down JJB.

Next’s saviour Jones and Williams faced a mammoth task to save JJB on their arrival. After they launched an investigation into shareholdings, Ronnie was suspended and they re-jigged most of JJB’s senior management team. 

Coming into sports retail, former Selfridges boss Williams says what struck him was that it was a quite “an enclosed group”, with few retailers and a number of large brands dominant.

“There is a danger that it becomes too much of a closed community and innovation gets stifled,” says Williams. “When there is a lack of competition there is not a natural environment for new things to be tested. There are lots of strong individuals in retail and the sports industry is no different. This is not always a benefit.”

Williams believes JJB lost focus and got lost between JD Sports and Sports Direct. “JJB forgot its heritage trying to copy what Sports Direct did,” he says.

Celebrating sport

If JJB can survive, there is a clear market position to play for, potentially enabling it to become a formidable competitor in sports retail once more.

Comparing the sports sector to the fashion industry, Williams says: “In fashion there are shows twice a year; in sports there are events taking place every day and JJB needs to have a close affinity to that.”

Whelan also wants to align his newly acquired business with sporting events, particularly the 2012 Olympics. “The whole of the country is going to get behind the Olympics,” he says.

There is also the chance that England could host the rugby World Cup in 2015 and the football World Cup in 2016. “If we can get football and rugby here it would be absolutely phenomenal for Britain,” said Whelan.

He believes that sports should inspire young people and aims to do that through his new business. “We want to get youngsters back into sports and get them to lose interest in drugs and crime,” he says.

“The country is in recession but we’ve had these times before. We will turn a corner and one thing that will come out is sport.”

As that happens, there are further opportunities for sports retail, such as the development of online. Hinton says “Specialists can offer wider ranges online and extend their reach as well as their product range.”

Williams agrees that this is an under-exploited opportunity. “There is no serious [sports] clothes offer on the internet. Branded sites have done it but no retailer,” he observes.

Hinton says the challenges facing sports specialists are similar to those of the value-fashion market. Driven by volume sales, it is a market at which the supermarkets are chipping away.

A Verdict report into the threats and opportunities for the sportswear sector in 2009 said that Sports Direct’s offer, aimed at the “casual shopper”, competes with retailers such as Primark, Tesco and Asda’s clothing.

Hinton also says there will be a threat from department stores if specialist brands want their merchandise to be displayed in particular ways. “Department stores are looking to build up their sports areas as there is market share there to gain. They offer a premium environment for the brands and someone like John Lewis can offer authority and advice,” she says.

But if the right opportunities can be grasped and the right niches carved out, there is room for four solid players in the sportswear market. Williams says that the shift will “be to the benefit of the consumer and the industry as
a whole.”

One source points out: “Now JJB is in capable hands, you have Ashley, Whelan, JD chairman Peter Cowgill and Jones at JJB – four very talented business people.”

Another player is, of course, Blacks Leisure, which has struggled despite its more distinct position in the outdoor retail market. Although Blacks does not like to see itself as a sports retailer, it is included in the group and was at the centre of a potential bid from Mike Ashley before talks were shelved last week.  

Despite the turmoil in the sector, Verdict expects the market to grow faster between 2008 and 2013 than over the previous five years. It believes the increase will be spurred mostly by the growth of equipment sales rather than apparel, creating a market worth £9.8bn by 2013. 

The possibility of holding arguably three of the biggest sporting events in the world, in the UK, in the next seven years will throw up great opportunities for sportswear retailers.

Last week’s deal represented the starter’s whistle on a new race for success. With Whelan and Ashley now once again pitched against each other, it is likely to be an eventful few years.