Nick Bubb's verdict: Sports Direct - Ashley 5, the OFT 0?

Mike Ashley has been running rings around Sports Direct’s rivals in sports retailing. And although he has had some confrontations with the OFT over the years, it is remarkable how he has ended up as the master of all he surveys, completely dominating the market after the demise of JJB Sports.

To be fair to the so-called Office of Fair Trading, there’s not much the regulators can do to stop one company dominating a market if all its rivals collapse or go out of business. After all, it’s not as if Sports Direct has been exploiting its growing monopoly by gouging the consumer with high prices, quite the reverse.

The purists complain that Ashley’s ‘pile it high and sell it cheap’ approach has turned his stores into jumbled bazaars, but consumers seem to love it. And even though JJB and the big suppliers like Nike and Adidas have insisted that there is room in the market for a real sports retail specialist, consumers haven’t been flocking to JJB’s stores.

Back in the spring, JJB revamped its store on the Broughton retail park near Chester to much acclaim for the way it merchandised exclusive performance products. But this upmarket JJB store is not one of the properties that Sports Direct is buying, because it already has a slightly smaller store nearby on the park. As the 300,000 sq ft Broughton Shopping Park is part owned by British Land and anchored by Tesco Extra, we can be sure that the rents aren’t cheap, but Sports Direct clearly has the more viable store.

Ashley hasn’t got where he is today by not being able to seize an opportunity and he has, in typical fashion , negotiated a terrific deal with the administrator of JJB, picking up 20 stores, plus the Wigan HQ freehold property, the Slazenger golf brand rights, all the stock and, allegedly, the JJB website. Not bad for a total of £24m, and the 20 stores are presumably cherry-picked. They include a few in Scotland and Northern Ireland, as well as a few Southern stores like Brighton and Dover. Nearly all appear to be retail park stores, although the biggest JJB store being acquired is actually a high street store in Liverpool city centre.

It may be that the OFT stopped Sports Direct from buying more than 20 stores, but it’s not clear why Sports Direct would want more, as the other 133 JJB stores are closing and he will have all their stock to liquidate as he sees fit.

So, as he looks over the rubble of his competition, who can stop Ashley now? He will be mindful of the power of Amazon, but he has cleverly segmented his business, by encouraging consumers to buy specialist sports equipment and accessories from his online operation, freeing up the stores to focus on sports clothing and footwear. With hindsight, changing the store trading names from Sports Soccer and Sports World to Sports Direct was another master stroke.

Ashley will be focused on persuading Nike and Adidas that Sports Direct is now the only place to come to in order to sell their best and most exclusive new lines and, though their reluctance to deal with him is obvious, it is hard to see what alternatives they have.

Ashley has already burnished his more upmarket credentials by building his new Premium Lifestyle division, showing that he can be a good steward of upscale brands.

And what of JD Sports? Well, it’s been a long while since you could buy a cricket bat in a JD shop, but JD has a big share of the trainers and the outdoor sports market, and JD’s Peter Cowgill will be mindful of the fact thatAshley famously told analysts last year that “I’ll finish off JJB first and then I’ll move on to JD”.

Well, Ashley has played a blinder so far and it would be a brave man who would bet against him getting what he wants. Let us hope that JD has not sown the seeds of its own demise by making too many acquisitions itself.