Shopping is moving online and the traditional high street names find themselves in existential crisis.
Mike Ashley has responded by trying to drag his Sports Direct empire upmarket and by expanding it. In the last two years his group has hoovered up a series of retailers in various states of distress.
The so-called “elevation” strategy - “we’re going from Donnay to Dolce“, quipped one Sports Direct executive on Monday - has been widely mocked but there are signs it may be working.
Profits have risen and are forecast to keep rising. On Monday morning the company’s share price took off.
“Frasers Group”, as Ashley now wants the business to be known, owns Sports Direct, of course. It has also taken over Evans bicycles, Sofa.com, Jack Wills, Game Digital and House of Fraser. Most of them were either insolvent or close to being so when he bought them.
In the last 12 months alone, Ashley has taken on an extra 300 shops, almost one million square square feet of retail space.
Ashley speaks of “green shoots” at House of Fraser but there’s trouble ahead. “There are House of Fraser stores paying no rent but still losing money,” Ashley explains. How many? He won’t say but the number of department stores will “continue to reduce” next year.
Ashley bought House of Fraser out of administration last summer vowing to “save” 80% of its 59 department stores. Seven have gone, more will follow.
Game Digital will ”struggle” as a standalone business, according to Ashley. The footprint of 257 shops will be “resized” next year.
Ashley is sign-posting what happens next but also suggesting that the scale of store closures could be limited if the government carries out an urgent reform of the business rates system.
The tax in its current form is “killing the high street” and needs changing, Ashley says.
“[Reform] can’t be kicked into long grass any further because as everyone can see there is a tsunami on high street,” argues Chris Wootton, Sports Direct’s CFO. “Retailers are going down every week and business rates will have a huge part to play in that.”
There is broad agreement that business rates is a tax that is in need of an overhaul. The Institute for Fiscal Studies - judge and jury in such matters - believes “there are lots of things wrong with [the tax]”.
Boris Johnson promised a “fundamental review” in his manifesto. Theresa May promised something similar in 2017 but it never came to pass. Closing shops and making people redundant are deeply unpopular things to do.
Ashley will be doing both next year and he will be looking to spread responsibility as widely as he possibly can.