What does Mike Ashley’s resignation mean for Frasers Group?

By guest author Sahar Nazir from Retail Gazette

News broke out on Wednesday , August 4, 2021, about Frasers Group boss Mike Ashley considering resigning from his role and handing the reins to his prospective son-in-law and head of elevation Michael Murray.

The speculation was confirmed this morning, August 5, 2021, when Ashley said he would step aside as part of a leadership reshuffle.

The parent company of Sports Direct, House of Fraser, Jack Wills, Evans Cycles and Flannels said it was currently proposed that Murray would become chief executive in May next year.

Murray is currently responsible for modernising the retail giant and creating a more upmarket image. Just last month, he told The Telegraph that Ashley was “not involved” in the future of the business. Murray also said at the time that he was among Ashley’s trusted young senior executives responsible for delivering Frasers Group’s turnaround scheme.

Ashley will remain on the board as an executive director once the leadership reshuffle is complete. Since founding Sports Direct in 1982, he has rapidly grown his retail empire by acquiring a string of distressed British retailers.

Frasers Group was formerly known as Sports Direct International before it underwent a name change in December 2019 to reflect the direction of the business after acquiring department store chain House of Fraser.

The news of the appointment coincides with Frasers Group’s trading update, in which pre-tax profits collapsed 94.1 % to GBP 8.5 million for the year to April 25, compared with GBP 143.5 million in the previous year.

Frasers Group cited declining sales in both UK sports retail and European retail divisions, largely due to enforced store closures from lockdowns.

However, it noted an uptick of 1.9 % in its premium lifestyle business, to GBP 735 million, thanks to an improved online offer and flagship store openings of the Flannels fascia.

Juliet Cuell, associate retail analyst at GlobalData, said this year would not only be a period of recovery for the Frasers Group, but also one of transition for the company as Murray succeeds Ashley as chief executive.

“Murray has spearheaded the Frasers Group’s elevation strategy, modernising stores and exploiting opportunities in the premium and luxury fashion segment,” she said.

“Further investment in fulfilment will be crucial to remain competitive.

“Its newest Flannels store opened in July in Sheffield’s Meadowhall shopping centre and houses the first Flannels Beauty space, including a beauty changing room where customers can trial make-up before buying.

“This will elevate its new beauty proposition, which is up against competitors such as Next, with both players vying to establish themselves as a destination on the high street, following the struggles of traditional department stores.

“Football merchandise is proving popular with consumers and Sports Direct was ranked the third most popular retailer for purchases of this category.”

Liam Patterson, chief executive and founder at marketing service Bidnamic, argued that although Ashley’s billion pound empire has acquired House of Fraser, Evans Cycles, Sofa.com, Agent Provocateur, Game, USC and Flannels, he has also unsuccessfully tried to buy Debenhams, as well as Patisserie Valerie, LK Bennett, and Hamleys.

“The number of retail businesses he’s acquired or invested in has surged 52.5 per cent since 2015, but this retail empire increasingly resembles Frankenstein’s Monster; a patchwork blend of various struggling high street brands,” he told Retail Gazette.

“While Ashley has been able to tame Frankenstein’s Monster through sheer force of will and acquisition, it’s unclear whenever his replacement, Murray, has the knowledge and expertise to keep Fraser Group together.

“Murray’s previous title as ‘head of elevation’ at Frasers, however, is an indication that he might be able to modernise the group for the post-pandemic landscape.”

Patterson added that with Covid-19 restrictions forcing people to shop increasingly online, Murray needs to build on his previous work by “transforming the business from a brick-and-mortar powerhouse” to a modern retail group that embraces ecommerce and omnichannel retail marketing strategies.

Meanwhile, retail analyst Richard Hyman said history shows that “Ashley will be clear and decisive with his actions” and is not afraid to make strong and bold decisions in a bid to give him an edge in the sector.

“Not every move he has made has been perfect and he is fully aware of that, but he doesn’t mind putting his neck on the line,” he said.