Mike Ashley takes the Sports Direct route to running Newcastle United
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Version 0 of 1. It is July 2007. Five months after the £2.2bn flotation of the business he has aggressively built into Britain’s biggest sports retailer and three months after taking control of Newcastle United for £134m, Mike Ashley is sitting in the bar of London’s Four Seasons hotel in ripped jeans and a casual shirt. Under fire from investors spooked by Sports Direct’s plummeting share price he called “these City people” a “bunch of crybabies” and warned them he had “balls of steel”. Frustratingly for his critics, he was right. From a low of 32p, the Sports Direct share price now stands around £6 (it hit a high of (£9.22 in April). It is the certainty that he knows best, buoyed by being proved right time and time again, that underpins his stubborn reluctance to sell Newcastle on the cheap or to be seen to be swayed by fan power over the fate of Alan Pardew. The story of Ashley’s rise has been well told: how he took on the northern cabal of sportswear retailers that included the JJB Sports magnate and Wigan Athletic owner, Dave Whelan, and aggressively bested them; how he built the business by picking up distressed brands on the cheap, allowing him complete control of the supply chain, and used the proceeds to slash the prices of premium brands like Nike and Adidas. According to those who have dealt with him, he is far from a snarling Rottweiler. On the contrary he is pleasant, direct and courteous over dinner or drinks. He is said to have one of the sharpest strategic minds in the business and likes to think of himself as the mechanic in a Formula One team, happy tinkering in the garage to solve supply chain issues. It has also been suggested that he is a man who will say one thing and allow his lieutenants to do another. The former FA chairman David Bernstein, who headed Blacks Leisure during a bruising five-year aggressive takeover battle with Sports Direct, once called the company’s modus operandi “aggressive and bullying“. That fits with the experience of Kevin Keegan, who can still be seen on YouTube speaking at a function in the north-east and bemoaning Ashley’s lieutenants: “I found him during my second short stint here OK. What I didn’t get was the people he surrounded himself with.” He is the sort of man who can happily risk £200,000 on a guessing game of Spoof to settle a dispute with a Merrill Lynch banker over fees or place a £43m bet on the value of Tesco shares. He revels in taking on the establishment – be they football agents, a rival “club” of sportswear magnates or the City – and is loyal to the point of stubbornness to the handful of associates that have helped him to a £3.75bn fortune and a sprawling business empire now looking to expand into Europe. In short, he is difficult to second-guess and twice as hard to reason with once his mind is made up. So it is perhaps no surprise that Newcastle fans have instead turned their ire on Pardew, who they perceive as Ashley’s stooge. Analysis of Ashley’s motivation has tended to divide his tenure into two acts. The first, shorter, period had him treating St James’ Park as his personal playground, assuming that wearing a black and white shirt and getting a few rounds in would endear him to fans. The second, following the emotional 2008 statement in the wake of the Keegan debacle in which he vowed to sell the club, has him running Newcastle at break even and using it as a giant billboard for Sports Direct. Michael Walker, in his new book on football in the region, memorably points out that 137 Sports Direct logos now adorn one of the most famous grounds in football. But business considerations were always uppermost in Ashley’s mind when he swooped for Newcastle and provide the answer to the question that has been perplexing many ever since: why did he buy the club in the first place? Recognising that in contrast to most other forms of clothes retailing, in sport the big global brands – Nike, Adidas, Puma et al – held sway in all price negotiations, Ashley saw the purchase of a high-profile football club as a means to buy a seat at the table. The way he saw it, it would not only boost the Sports Direct brand – see the temporary renaming of the stadium, the endless billboards – but, more crucially, give him leverage in negotiations. Looking at the stellar path of Sports Direct since it is hard not to conclude that it has worked. “You’ve just got to look at the trajectory of Newcastle United and compare that with Sports Direct. They are going in two opposite directions,” says Peter Fanning of the Newcastle United Supporters Trust. “One of his main strategies seems to be buying well-known brands to stick on your shelf as though it’s the quality brand. He seems to have applied that to Newcastle, thinking ‘I could buy that club, use the brand.’ “He’s not bothered what happens with the club as long as they stay in the Premier League and he’s got the worldwide coverage he needs. His heart is in what it brings to Sports Direct rather than what it brings the club.” More than £100m in personal, interest-free loans still sit on the balance sheet – an insurance policy to ensure he gets his money back that is likely to deter potential purchasers. Going through Newcastle’s accounts since the takeover, a picture emerges of a club run in much the same way as Ashley’s hugely successful, sprawling empire of sports shops. To his critics, he buys distressed assets – once proud brands such as Dunlop, Slazenger, Karrimor, Lonsdale and Lilywhites – and sweats them for a few years before repeating the process. To his advocates he is a genius with the ability to spot an opportunity before anyone else. Selling those brands direct allowed him to cut out the middleman and take a greater cut of the profits, using them to fund price cuts on premium brands. Ashley has tried to run Newcastle in much the same way. He has cut costs, reduced the wage bill, restructured a business that was, in many ways, poorly run and made it profitable. With a policy of cashing in on valuable players while attempting to bring through new ones, he has consistently turned a modest profit since the club returned to the Premier League. In contrast to other clubs, and to Newcastle in the more profligate era of Douglas Hall and Freddie Shepherd, the wages to revenue ratio has remained at a sensible level. He might argue that fans need only look down the A1 to Leeds United to see how much worse things can be when “living the dream” becomes the guiding obsession. In 2012, when Newcastle finished fifth with a squad comprised of gems unearthed from France and elsewhere by the chief scout, Graham Carr, it seemed to be working. But a football club is not merely a business. Not only that, but as Arsène Wenger eventually found, a steady supply of hidden gems in a ferociously competitive market is impossible to guarantee. The fans vehemently believe Ashley has got the balance wrong. Whereas a cheap pair of sports socks is an end in itself, their relationship with their team is different. The instinct that has served Ashley so well in business – relying on a trusted inner circle of associates ever since he opened his first store in 1982 – has led him down endless blind alleys to ill-chosen allies in football, from Dennis Wise to Joe Kinnear. Since those early, bruising mis-steps Ashley has adopted a “never apologise, never explain” philosophy. Estranged from the fans, at war with the local press and increasingly isolated, he prefers to keep them all guessing. This week’s purchase of more shares in Rangers (where Sports Direct has naming rights and a deal to sell merchandise), taking his overall stake to just below the 10% threshold he has agreed with the SFA, was just another in a series of curveballs. Those close to Ashley insist a recent statement when he said he planned to remain as Newcastle owner until at least the end of next season should be taken at face value. The Rangers play could be seen in the context of his frequent punts on what he thinks are undervalued businesses – such as his further investment in Debenhams on Thursday or Tesco’s. Or, just as characteristically, an aggressive attempt to keep his options open. Attendances at St James’ remain extraordinarily high given the drift of recent years. But some fans – contemplating the racks of Wonga-sponsored shirts in a club shop that now feeds the bottom line of Sports Direct rather than the club – are now wondering whether a boycott of Ashley’s shops and his club would make any difference. But they know the truth is that a man with so much money – who recently reportedly told analysts he would warn European rivals who did not want to cooperate with his Sports Direct expansion plans that “we’ll come to your country and smash you to bits” – is unlikely to care. “He’s a very resilient guy,” says one insider. “His view is that it’s all about where you finish.” So the fans remain locked in a grim embrace with an inscrutable owner who refuses to engage and instead concentrate their fire on the manager. “Ashley is a symptom of the state English football has got itself into, not the cause. With the amount of television money coming into the game, it has attracted a different sort of owner,” says Fanning, who carries in his wallet his father’s ticket stub from the 1955 FA Cup Final – the last time Newcastle won that trophy. “We don’t have unrealistic expectations. What the fans want is a club with some ambition. Instead, mid-table mediocrity is the only gameplan.” At the moment, even that looks a long way off. |