The Retail Week – October 26, 2007

When Retail-Week.com broke the news yesterday that Sports Direct’s independent non-executive director Chris Bulmer was resigning, the retailer reacted swiftly by announcing two new board appointments.

Retail property baron Malcolm Dalgleish and former Reebok boss Dave Singleton became independent non-execs with immediate effect.

The pair are highly respected but, in the continued absence of a full-time chairman, it’s legitimate to wonder to what extent they can act as a counterbalance to maverick founder and deputy chairman Mike Ashley.

Fears remain that Ashley will continue to utterly dominate the business and it’s thought he would like to make acting chairman Simon Bentley chief executive.

Ashley remains Sports Direct’s biggest shareholder and his views deserve to be given some weight for that reason alone. The fact that he built the business from scratch into the powerhouse it is today is evidence of fantastic retail flair.

Bentley is a well-respected retailer and could prove an effective chief executive. But such an important appointment should not be made before a heavyweight chairman has had the chance to fully assess the situation and consider alternatives.

When Ashley chose to list Sports Direct on the public market, he became responsible for other people’s investments as well as his own and his cavalier behaviour since the February IPO has not served his new shareholders well.

Nobody would try to dissuade Ashley from continuing to work his retail magic, but the pressure needs to be kept up for him to recognise the interests of his co-owners.

That’s why the concerns about Sports Direct’s corporate governance standards matter. Chris Bulmer believed the best way to throw the issue into relief was to stand down. The baton now passes to Dalgleish and Singleton. Let’s hope they show their independence.

A PASSION FOR FASHION
Fashion tycoon Sir Philip Green may not be taking a dividend, but he did manage to nudge up operating profits and increase like-for-likes over the year to September 1, a good performance over a difficult period.

Given that, for so much of the reporting year, Britain endured some of the worst rainfall since Noah built the ark, Arcadia’s results – boosted by sensations such as the Kate Moss collection for Topshop – show that good product and tight management can win out even when external circumstances conspire against shopkeepers.

Like other retailers, Green was cautious about Christmas and next year. What was interesting was that he ruled out a shift towards increased price competition with Primark and other value retailers, choosing instead to rely upon product quality and fashionability to keep drawing shoppers through his doors.

It can be a cliche to talk about passion for product, but in Green’s case, the description fits. It’s surprising how often retail directors fail to communicate real conviction about what they sell. But without great product and belief in the product, retail doesn’t amount to much.

Price will remain a key battleground, but not the only one. Tat often won’t sell just because it’s cheap – at Christmas, or any other time.