Mike Ashley’s Sports Direct could be about to ditch its six-floor Lillywhites store on London’s Piccadilly after putting the lease on the market.
A sale could lead to the removal of the Lillywhites name from the site where the specialist sports department store has traded since 1925.
Once known as the Harrods of sport, where early Wimbledon contestants were obliged to buy their shorts and George VI picked up his coronation slippers, Lillywhites was snapped up by Ashley in 2002.
The 97-year lease for the 67,700 sq ft London building has been put on the market as the landlord, Criterion Capital, conducts rent review talks.
What’s the problem?
Physical retailers have been hit by a combination of changing habits, unseasonably warm weather, rising costs and broader economic problems. In 2018 Toys R Us, Maplin and Poundworld disappeared as a result.
In terms of habits, shoppers are switching to buying online. The likes of Amazon have an unfair advantage because they have a lower business rate bill, which holds down costs and enables online retailers to woo shoppers with low prices. Business rates are taxes, based on the value of commercial property, that are imposed on traditional retailers with physical stores.
At the same time, there is a move away from buying ‘stuff’ as more people live in smaller homes and rent rather than buy. Those pressures have come just as rising labour and product costs, partly fuelled by Brexit, have coincided with economic and political uncertainty that has dampened consumer confidence.
What help do retailers need?
Retailers with a high-street presence want the government to change business rates. They also want more political certainty as the potential for a no deal Brexit means some are not only incurring additional costs for stockpiling goods but are unsure about the impact of tariffs after October 2019. Retailers also want more investment in town centres to help them adapt to changing trends, as well as a cut to high parking charges which they say put off shoppers.
What is the government doing?
In the October 2018 budget the government announced some relief on business rates for independent shopkeepers. It has also set up a £675m ‘future high streets’ fund under which local councils can bid for up to £25m towards regeneration projects such as refurbishing local historic buildings and improving transport links. The fund will also pay for the creation of a high street taskforce to provide expertise and hands-on support to local areas.
What is the outlook in 2019?
Some retailers could go under. Weakened by a difficult Christmas – which accounts for the entire annual profits of many retailers, and with further Brexit wobbles to come – retailers are facing a tough 2019. Another rise in the national minimum wage in April and the falling value of the pound against the dollar, which is used to buy goods in the far east, have also added to costs and hit profits.
Documents sent to potential buyers say rents for the occupier could be as much as £4m a year. Sports Direct is thought to pay less than £1m a year.
The area is undergoing redevelopment, with a number of high-profile sites empty including the home of Tower Records, and Criterion is repurposing the nearby Trocadero.
Lillywhites was founded by members of the Lillywhite cricketing family in 1863 with a store that sold cricketing equipment and cigars on Haymarket, and by 2002 it was a chain with 10 sites around the UK.
The Forte family owned the business for years before selling it to a Portuguese retail group, Jerónimo Martins, for £28.5m in 1995.
Jerónimo Martins sold it to Ashley in 2002 after getting into financial difficulties amid growing competition from Ashley’s sports chain, then called Sports Soccer, and other rivals such as the now defunct JJB Sports.
Since Ashley bought it, Lillywhites’ main store has sold the same cut-price sportswear as Sports Direct. Its carved wood panelled staircase and ornate windows are now decorated with banners for Adidas trainers and discount suitcases. There are two other Lillywhites stores left in the UK and three in Kuwait.
Property sources were sceptical about whether Sports Direct would be able to find a retailer willing to take on its large site at a time when department stores are struggling.
Sports Direct’s House of Fraser chain has closed at least five sites since Ashley bought it out of administration last year, and it is expected to close more in 2020. Debenhams is poised to close more than 20 stores in January, and a number of local department store groups including Scotland’s Watt Brothers have fallen into administration.
Sports Direct declined to comment.
