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Sports Direct's Mike Ashley warns that high street is dying - business live Sports Direct's Mike Ashley calls for web tax to save 'dying' high street - business live
(35 minutes later)
And finally, Mike Ashley hinted that House of Fraser could work closer with Debenhams (in which he owns a stake).
He tol MPs:
“I told them to work together. They should work together
Mike Ashley winds up his hearing with a prediction -- Harrods and Selfridges will have a good year.
One of the reasons that House of Fraser failed is that it didn’t elevate itself, Ashley continues.
Luxury brands are on the up. Teenagers, people today, want to wear their wealth.
Mike Ashley returns to his big theme - the internet has killed the high street.
He tells the MPs:
The web has killed the high street, not the local councils, not this, not that.
Ashley concedes that everyone involved may have moved too slowly to tackle the issue. Now, unless major change is pushed through, the high street is finished.
It is just going to die, and you’ll be left with Oxford Street and Bond Street.
Outside of London, it’s going to be a ghost town. Sorry, that’s what it’s going to be.
Interestingly, Mike Ashley says that local councils have helped keep House of Fraser stores open since his Sports Direct chain took it over this year.
Ashley tells the committee that some landlords have refused to cut the rent, in the hope that the department store will close - freeing them up potentially turn it into housing.
Councils, though, insisted that everyone involved made an effort to keep the House of Fraser store open.
Ashley suggests, though, that some stores need to downside - perhaps by turning their upper floors into residential units.
I accept House of Fraser cannot have 500,000 square feet in Birmingham. Honestly, you would need an Uber to take you round. It’s ridiculous.
Q: There are reports that high street rents might crash next year, by 20%. Wouldn’t that be good news for the retailers? But wouldn’t rents NOT fall, if landlords were able to turn high street stores into residential units (as some campaigners have asked for)Q: There are reports that high street rents might crash next year, by 20%. Wouldn’t that be good news for the retailers? But wouldn’t rents NOT fall, if landlords were able to turn high street stores into residential units (as some campaigners have asked for)
You’ll make me hated by every landlord in the country, but you’re absolutely correct, Ashley replies.You’ll make me hated by every landlord in the country, but you’re absolutely correct, Ashley replies.
Labour MP Liz Twist, who represents the Bladon in North-East England, asks Mr Ashley to meet with her to discuss the fate of the House of Fraser Metro store.Labour MP Liz Twist, who represents the Bladon in North-East England, asks Mr Ashley to meet with her to discuss the fate of the House of Fraser Metro store.
No, absolutely not, Ashey replies.No, absolutely not, Ashey replies.
Q: Why not?Q: Why not?
If I do it for one person, think of all the other people that I have let down, Ashley replies, burying his head in his hands.If I do it for one person, think of all the other people that I have let down, Ashley replies, burying his head in his hands.
People keep thinking I can do these one-off things. It’s not easy to do,People keep thinking I can do these one-off things. It’s not easy to do,
But Ashley is prepared to attend a meeting with MPs to discuss the wider issue, ideally with HoFs landlords too.But Ashley is prepared to attend a meeting with MPs to discuss the wider issue, ideally with HoFs landlords too.
Q: What’s happening with House of Fraser stores, and your push to cut rents?Q: What’s happening with House of Fraser stores, and your push to cut rents?
Mike Ashley says local councils are refusing to cut rents, because they can see that HoF stores are profitable...but they’re not recognising the overhead costs behind the scenes.Mike Ashley says local councils are refusing to cut rents, because they can see that HoF stores are profitable...but they’re not recognising the overhead costs behind the scenes.
So a store that seems to be making a £2m profit on paper is actually losing £2m, once you factor in the true costs of running a business.So a store that seems to be making a £2m profit on paper is actually losing £2m, once you factor in the true costs of running a business.
Ashley then give a fascinating insight into business, saying that accountants can make up nearly any number you like, to flatter a company’s accounts.Ashley then give a fascinating insight into business, saying that accountants can make up nearly any number you like, to flatter a company’s accounts.
You don’t even understand what they’re talking about, and they’ll say ‘I can make that store loss-making, or I can make it profitable’.You don’t even understand what they’re talking about, and they’ll say ‘I can make that store loss-making, or I can make it profitable’.
They say “I’ll put exceptions in - what are they when they’re at home?” Ashley adds with (apparent) disbelief.They say “I’ll put exceptions in - what are they when they’re at home?” Ashley adds with (apparent) disbelief.
The underlying problem in UK retail is the web, says Mike Ashley, as he continues to brief MPs on the future of the high street.The underlying problem in UK retail is the web, says Mike Ashley, as he continues to brief MPs on the future of the high street.
Looking magnanimously at the Housing, Communities and Local Government Committee, he adds kindly:Looking magnanimously at the Housing, Communities and Local Government Committee, he adds kindly:
It’s not your fault, you didn’t do it.It’s not your fault, you didn’t do it.
Q: Why is there such a problem with rents in the retail sector?Q: Why is there such a problem with rents in the retail sector?
Landlords and retailers have always been uneasy bedfellows, says Mike Ashley. And whenever one has the upper hand, he “gets out his hammer” and bashes the other one.Landlords and retailers have always been uneasy bedfellows, says Mike Ashley. And whenever one has the upper hand, he “gets out his hammer” and bashes the other one.
He says “good luck” to any landlord who owns highly lucrative land on Bond Street.He says “good luck” to any landlord who owns highly lucrative land on Bond Street.
But he’s more critical of landlords who have got retailers on contracts where rents can only rise. Those rental agreements are a “downward death spiral....”But he’s more critical of landlords who have got retailers on contracts where rents can only rise. Those rental agreements are a “downward death spiral....”
Ashley blames successful companies, such as McDonalds and his own Sports Direct chain, which agreed to hefty rent deals in the good times - which everyone else was then moved onto as well.Ashley blames successful companies, such as McDonalds and his own Sports Direct chain, which agreed to hefty rent deals in the good times - which everyone else was then moved onto as well.
If you’re just tuning into Mike Ashley’s hearing on the future of the high street, here’s what you’ve missed...If you’re just tuning into Mike Ashley’s hearing on the future of the high street, here’s what you’ve missed...
Mike Ashley evidence to Commons Select Committee:-The High Street is at bottom of the swimming pool-It requires electric shock treatment-It’s not my fault -I don’t sit in an office stroking a white cat-I’m not God-I’m not Father Christmas pic.twitter.com/STgk4chS5VMike Ashley evidence to Commons Select Committee:-The High Street is at bottom of the swimming pool-It requires electric shock treatment-It’s not my fault -I don’t sit in an office stroking a white cat-I’m not God-I’m not Father Christmas pic.twitter.com/STgk4chS5V
Mike Ashley now concedes that it would be difficult to implement his plan for a new tax on web companies, but insists that it’s simple in principle.Mike Ashley now concedes that it would be difficult to implement his plan for a new tax on web companies, but insists that it’s simple in principle.
[Reminder, the idea is a new levy on any retailer who does over 20% of its business online][Reminder, the idea is a new levy on any retailer who does over 20% of its business online]
Q: Many retailers say that the solution is lower business rates and free parking..Q: Many retailers say that the solution is lower business rates and free parking..
Yes, but who’s going to pay for it, Ashley shoots back.Yes, but who’s going to pay for it, Ashley shoots back.
He admits that Sports Direct, which he founded, would be hit in the pocket if the government took up his suggestion of a new tax on e-tailers.He admits that Sports Direct, which he founded, would be hit in the pocket if the government took up his suggestion of a new tax on e-tailers.
Sports Direct won’t be pleased with me for my suggestion. It’s not necessarily a good fix for Sports Direct , but it’s a fantastic fix for the high street.Sports Direct won’t be pleased with me for my suggestion. It’s not necessarily a good fix for Sports Direct , but it’s a fantastic fix for the high street.
Otherwise, Ashley argues, the high street is destined for destruction:Otherwise, Ashley argues, the high street is destined for destruction:
The high street won’t make 2030, it won’t get there, unless you do something really radical and grab the bulls by the horns.The high street won’t make 2030, it won’t get there, unless you do something really radical and grab the bulls by the horns.
Q: How would your plan for a new tax on web retailers work when people buy goods from abroad?Q: How would your plan for a new tax on web retailers work when people buy goods from abroad?
In theory you could still tax them, Ashley insists, but agrees that overseas retailers would have to sign up to pay it.In theory you could still tax them, Ashley insists, but agrees that overseas retailers would have to sign up to pay it.
You want to get retailers saving the high street, he adds - through a new tax on companies who make most of their money selling online only.You want to get retailers saving the high street, he adds - through a new tax on companies who make most of their money selling online only.
High stores have to change, it’s not just about a sea of clothing any more, says Mike Ashley.High stores have to change, it’s not just about a sea of clothing any more, says Mike Ashley.
He suggests retailers need to be much more innovative -- maybe with different opening hours, more self-service tills.He suggests retailers need to be much more innovative -- maybe with different opening hours, more self-service tills.
In another burst of blue-sky thinking, Mike Ashley suggests high street stores could offer services such as free computer gaming to lure customers in.
Retail analyst Neil Saunders isn’t impressed:
Tax the web by 20%, says Mike Ashley. Maybe he forgets people already pay 20% VAT on most non-food. Making people pay 40% sales tax is ludicrous. Idiotic solution to a complex problem.
Here’s some video clips of Mike Ashley in action:
"Everybody knows you went in House of Fraser and it was like nobody was in there. The only people who were in there appeared to be the staff."House of Fraser boss Mike Ashley on combative form answering questions from MPs.@itvtynetees @itvcalendar pic.twitter.com/AD5Nn8wB1Q
'I'm not comparing myself to God... I'm not sitting my office stroking a white cat.'More highlights from Mike Ashley's evidence to MPs on the state of high streets:@itvtynetees @itvcalendar pic.twitter.com/uhF2J4hLCi
Mike Ashley now insists that he doesn’t “sit in an office stroking a white cat”, trying to decide which House of Fraser stores to shut following this year’s takeover.
Of course I’m worried about the state of the high street, he continues.
It’s not my fault the high street’s dying, is it? It’s not House of Fraser’s fault, it’s not Marks & Spencer’s fault, it’s not Debenham’s fault.
It’s very simply why the high street is dying - it’s the internet. The internet is killing the high street.
That’s quite a statement, given Sports Direct has hundreds of stores in the UK, just bought House of Fraser, and also has a stake in Debenhams.
"The internet is killing the high street", you have to address that problem if you want to save the high street says Mike Ashley
But Ashley has a cunning plan -- a new tax on web-only retailers, to encourage them to maintain a high street presence too.
Mike Ashley wants sales tax of online business where online is >20% of sales, which he says will make multichannel retailers invest in high streets in order to maintain <20% online penetration to dodge tax.
Mike Ashley: "You have to tax the internet for the good of the high street....tax the web boys 20 per cent."He's already described the high street as "dead, dead, dead...flat-lining...in the bottom of the swimming pool."
Q: You promised to turn House of Fraser into the Harrods of the high street and keep its 59 stores open, but now people are worried that their local store will close. How will you decide which stores to shut?
Ashley looks like he’s going to burst a blood vessel.
I never said I would keep 59 stores over. Never, never, never...
Everyone knows I set a target of keep 80% of the estate open, the Sports Direct boss insists.
What person could keep 59 stores open - beside God? It’s impossible, it can’t be done.
Even keeping 80% open would be messianic, Ashley indicates, before adding modestly that he’s not comparing himself to God.
Mike Ashley is being grilled by MPs."If I managed to keep 80 per cent [of HoF stores] open that might be a God-like performance...and before anybody says it I'm not comparing myself to God..."
Over in the UK parliament, the boss of retailer Sports Direct is testifying to MPs about the future of the high street.
But Mike Ashley actually finds himself fending off tough questions about his company’s business practices, following the takeover of House of Fraser.
First off, he’s accused of letting customers down - by not refunding orders placed online just before House of Fraser went into administration. Ashley insists that customers received gift cards instead, as SPD got to grips with the company’s problems.
Mike Ashley is in front of the HCLG committee and is upset because a session that's supposed to be about the future of the high street has started off with questioning about House of Fraser gift cards post-administration and rescue
Ashley then asked whether he’ll be putting House of Fraser staff onto zero-hours contracts, something he’s been criticised for using heavily at Sports Direct.
Ashley insists that “the vast majority of staff love them”, but he won’t commit not to roll them out more heavily at HoF.
Getting impassioned, Ashley insists that he needs to keep all options open.
“I can’t, it’s impossible what you’re asking. It doesn’t make sense.
The high street has to change what it offers consumers.
That means stores might need to open later, and close later, Ashley suggests, telling MPs firmly:
Stop trying to showboat... I thought we were here to save the high street.
This is going to be a long hour for Mike Ashley. Wants to talk about the high street...has been asked about House of Fraser administration and now being tackled on zero hour contracts...
"The only people in there appeared to be the staff" Mike Ashley on House of Fraser
Mike Ashley tells MPs to "stop showboating" by asking him questions about House of Fraser. "I thought we were here to talk about the high street."
Mike Ashley already seems quite angry in meeting with MPs. He defends use of zero hours contracts an says vast majority of sports direct staff want to be on them
Mike Ashley tells MPs to "stop showboating" by asking him questions about House of Fraser. "I thought we were here to talk about the high street."
For all Donald Trump’s optimism, many financial analysts are unconvinced that the US and China can settle their trade dispute in just 90 days.
Reforming Beijing treatment of intellectual property will take much longer, and there’s only so much US produce which China can really absorb to help mop up the trade gap.
But still, the markets are up.
And that’s because the immediate threat of a deeper trade war has receded.
As Aninda Mitra, senior sovereign analyst at BNY Mellon Investment Management, puts it:
“To be sure, underlying problems remain unresolved. It is not as though existing tariffs are on the verge of being unwound. But what Xi has managed to extract from Trump is a stay on any escalation for three months. That interlude should see a stronger effort to set a framework for more talks and quid-pro quos.
In the long term, though, achieving full trade détente will be tricky:
“The best one can hope for in three months’ time is a trade and geopolitical deal in which we see a road-map for China to materially raise oil and agriculture imports from the U.S. to cut the bilateral surplus by more than one-half in about 1-2 years’ time. That will result in a diversion of Chinese imports from U.S. foes such as Russia and Iran, and possibly Saudi and rest of OPEC. I would imagine the Chinese would also acquiesce to at least some softening of U.S. access to technology and finance in China. Signals to this effect came from Xi suggesting he would not object to the Qualcomm-NXP deal if this were presented again.
“The highest priority for the Chinese authorities at the moment is to stabilize their economy. In this context, a 90-day truce should boost local sentiment, and prove more important from a psychological standpoint than recent policy stimulus which was seen as tepid, if not grudging.
In another boost to the White House, the US manufacturing sector has posted another month of strong growth.
The Institute for Supply Management has reported that new orders, employment levels and activity also jumped last month, while the prices paid by manufacturers fell.
This drove ISM’s monthly healthcheck on America’s factory sector up to 59.3. from 57.7. That level is consistent with strong growth.
There are some major names among the big movers on Wall Street today.
Aircraft maker Boeing has gained 6%, construction and machinery business Caterpillar is up 4%, and Apple has gained 2.6%. That suggests investors are optimistic that the trade war time-out will yield results.
Chipmakers AMD (+7.8%) and NVIDIA (+6%) are also romping ahead.
Randeep Somel, Director of Global Equities at M&G, explains why markets are upbeat:
The rally seen this morning in equity markets show that the escalating trade disputes are a significant concern to the global growth outlook of the world economy. Whilst its very early days and the process of normalising the trading relationship with China is going to be a complex process – today, at the very least is a signal that those negotiations can begin.
Riskier assets such as base metals and oil producers, as well as the US and European car manufacturers and associated supply chains are likely to show the most positive reflection of the news as they have borne the brunt of the negative headlines for most of this year.”
At 2.54pm FTSE 100 up 103 points st 7083 - DJIA up 342 points at 25881