Mike Ashley’s high street gamble raises more questions than it answers

Ten years ago in a Mayfair casino Mike Ashley made £1.3m on a single spin of the roulette wheel. His betting exploits, like those of fellow retail mogul Sir Philip Green, have highlighted the brash billionaire’s propensity to take risks. But over the course of 2018 Ashley has been making another type of gamble, not on gaming tables but on high streets.

This afternoon the enormity of that gamble was underlined when Ashley admitted he faced “significant challenges” at House of Fraser. His company Sports Direct reported a 27 per cent fall in half-year profits, after swallowing up £31.5m losses from the department store chain which it bought out for £90m in August. Never one to mince his words, the retail magnate also launched a scathing attack on the board of Debenhams, where he owns a 30 per cent stake, accusing the company of rejecting his offer of an interest-free £40m emergency loan.

It has been a day that summed up a year for the Newcastle United owner, who has not shied away from conflict with boards, shareholders, landlords and politicians in the wake of a dramatic spending spree over the summer.

Despite a more frugal approach towards investing at his football club, Ashley has not held back when it comes to retail acquisitions, recently snapping up Evans Cycles as well as House of Fraser, which he has pledged to transform into the “Harrods of the High Street”. But the jury is out on whether this is a good idea – let alone whether it can be executed.

Part of the reason that Harrods has thrived amid challenging retail conditions is precisely because it resolutely refuses to open lots of branches itself, fearing that expansion would dilute the brand. There is, and will only ever be, one Harrods.

Some in the City also wonder whether Ashley is the man who can carry out this mammoth task. Having built his empire on tracksuits and cheap trainers, he is now the owner of a department store portfolio that sells Gucci and Prada.

With smaller-scale stores like Flannels he is not a stranger to the high-end sector, but to play more seriously in the upmarket fashion league, Ashley needs to offer a high degree of service and luxury branding that is not exactly synonymous with his flagship Sports Direct business.

Then there is also the undeniable problem of footfall. Owning huge chunks of anchor real estate in areas where shoppers are buying more goods online is a problem plaguing all major high street retailers, Ashley included.

And yet while the question marks are very apparent, one thing is for certain: Ashley is a retail machine. He wins tough deals with suppliers and has an eye for a bargain. He commands huge respect in an industry that has claimed reputations of retail bosses who have failed to adapt to the changing consumer climate.

Ashley has now firmly spun the wheel for his high-end department store aspirations. It is one of the biggest gambles the retail industry has ever seen, but where the ball will land in 2019 is like any roulette game – uncertain, and a very big risk.