A day after the Competition and Markets Authority (CMA) warned of its plans to carry out a deeper probe into JD’s takeover of the Footasylum chain, Ashley’s Sports Direct International Plc (LON:SPD) stirred the pot further by highlighting its concerns about the power of big brands in the market.
CMA’s investigation highlighted “the power of the 'must-have' brands and potential market-wide practices aimed at controlling the supply and, ultimately, the pricing of their products”, Sports Direct said in a statement on regulatory news service on Friday.
The acquisition of Footasylum, which has already been completed, is not of material importance to JD in the context of the size of the group, representing only around 4% of sales, so Ashley seemed to be looking to raise awareness of the wider industry issue.
The CMA had said this week that the deal could result in “a worse deal for customers, both in-store and online, through higher prices, worse choice in stores or reductions in service quality” as JD and Footasylum are merging two of what is a small number of sports retailers firms possessing brand relationships and market presence “to be able to credibly meet the demands of sports fashion customers”.
Sports Direct said it had “received legal advice” that the CMA’s concerns around brand relationships are “likely to be a key focus” of any deeper investigation and “are also likely to have wider market implications beyond this transaction”.
Must-haves and the have-nots
While JD’s product offering is built around providing young people with fashionable trainers and ‘athleisure’, Ashley’s Sports Direct is a discounter and, despite his aims to be the “Harrods of the high street”, providing more of a practical sportswear product offering.
Says retail industry analyst James Yacoub at GlobalData: “Someone like Sports Direct is more functional. If you wanted the coolest trainers or tracksuit you’d go to JD but if you wanted football boots or a football top for your child you’d go to Sports Direct.”
Looking askance at JD's close ties with 'must have' brands served to emphasise Sports Direct's range of brands that the cool kids perhaps see as 'must-not haves', such as Lonsdale, Donnay, Slazenger and Firetrap.
Indeed, this is not deliberate, with one analyst saying the reason for the statement was "about how big brands shun him for JD".
Ashley, who last year orchestrated the takeover of struggling department store group House of Fraser, was also likely to still be smarting from his disappointment earlier in the week when a judge ruled in favour of Debenhams’ rescue deal with landlords to cut rents and close 50 stores.
Ashley had funded the group of commercial landlords that had taken Deb's to court, claiming the terms of the company voluntary arrangement were unfair.