A clash of visions at Sports Direct
Mike Ashley once admitted that there was in fact another person who has really been running Sports Direct.
She is a media-shy 51-year-old woman called Karen Byers. For almost three decades, Byers has been quietly working under Ashley as one of his core lieutenants, pulling 18 hour days and keeping a ruthless focus on the firm’s operations.
Yet earlier this month her long-term relationship with Sports Direct and its maverick owner came to an abrupt end, when Byers unexpectedly resigned from the business.
Read more: Sports Direct hit by £605m Belgian tax bill
Her sudden departure, City PM hears, is due to a clash of visions at the very top of Sports Direct. While retail chief Byers has been keen to keep the firm close to its roots, Ashley has been eyeing a more upmarket move for his high street group. It involves bringing in higher quality products with higher margins, as well as putting his higher-end brand Flannels in more House of Fraser stores.
A senior source at the firm said that Ashley told Byers to go away and think things through.
“We said she could come back if she wanted to, but she just couldn’t get her head around the fact that the business is changing.”
On Friday night, as investors and journalists digested the firm’s frantic late-night release of financial results, one line in the group’s report in effect admitted the split: “As the focus of the group moves to an elevated offering, including shop fits, this meant that Karen was no longer able to do the things she loved and was good at for so many years.”
Read more: Confusion reigns as Sports Direct delays its annual results
In shunning one of his most respected directors, Ashley risks repeating the mistakes of none other than his retail rival, Philip Green; many in the industry point to Green’s split with Topshop brand director Jane Shepherdson in 2006 as the beginning of the end for the Monaco-based tycoon’s fashion group.
One City retail veteran says the rift was worsened by a falling out between Byers and Michael Murray, Ashley’s future son-in-law and the man now charged with heading up the firm’s more “elevated” upmarket offer.
With Byers out of view, the Square Mile is already looking to see whether Murray, a man who looks poised to play an ever-increasing role by Ashley’s side, has what it takes to move the firm away from its reputation as a budget retailer.
Over the coming days, the City’s concerns over Sports Direct will likely be mainly focused on the immediate issues for Ashley. The fact that he is facing a €674m (£605m) tax bill from the Belgian authorities. The fact that he has now abandoned all guidance for 2020 due to troubles at his House of Fraser chain, which he admitted has ‘terminal problems’. The fact that his chief financial officer is standing down.
Even for Ashley, a man not unwilling to treat the traditions of the stock market with blatant disregard, the delays and surprises were a particularly chaotic and shambolic way of ending the week for shareholders, and they will take some time to digest in the Square Mile.
But when Friday’s dust settles, investors might in fact look at the current changing of the guard as the most important factor of all in deciding the fate of Ashley’s increasingly troubled high street empire.