Sports Direct’s attempt to turn itself into another John Lewis will begin in earnest this week. Mike Ashley’s comment that he wants to make his chain the best employer on the high street behind the department store giant was unprecedented. In the coming months we will see whether he means what he says or whether the 15p pay rise for staff was, as the trade union Unite claims, just a PR stunt.
As ever with Ashley, people will look for ulterior motives. He was forced into this position by a Guardian investigation last month into working conditions at the Sports Direct warehouse in Derbyshire and by investor impatience with the share price.
Key things to watch in 2016 are how the retailer changes its employment practices and its share price. The more the shares fall, the more Ashley will be pressured into sweeping changes.
The shares have been under strain since a handful of City analysts claimed Sports Direct may be past its peak. The company’s pile-it-high-and-sell-it-cheap approach has attracted bargain-hungry shoppers, but its reputation has been tarnished with customers and key suppliers. Major brands such as Adidas and Nike have become unhappy with Sports Direct’s presentation of its products and turned instead to JD Sports to launch new trainers and football shirts. In 2015, Sports Direct shares fell almost 20% while JD shares more than doubled.
Sports Direct is revamping its stores and moving to larger, out-of-town locations, but this could deter the canny customers who have made the company what it is. Some of Sports Direct’s overseas businesses are also struggling, so Ashley and his lieutenant Dave Forsey have a lot on their plates.
While the rest of the world starts the new year by looking ahead, retailers begin January by looking back. Christmas trading updates kick off this week with John Lewis, which is expected to set the benchmark for performance as well as working practices. Ashley and Sports Direct are a very long way from both.
