Mike Ashley doesn’t just need to convince suppliers that his plan for House of Fraser will work – he must get investors on side too.

The tycoon’s cut-price bid for House of Fraser was quickly accepted by administrators EY, but his plans are yet to be welcomed by suppliers.

Ashley’s acquisition of HoF fulfilled a long-held ambition for the Sports Direct founder. He has long hankered after a department store group and he is now the proud owner of one of Britain’s biggest names.

“The smoothness with which he acquired the retailer out of administration is in stark contrast with the chaos over which Ashley reigned last week”

But the smoothness with which he acquired the retailer out of administration – it took just three hours – is in stark contrast with the chaos over which Ashley reigned last week.

A warehouse was the first to be affected. As revealed by Retail Week, employees downed tools at the XPO-operated site in Wellingborough after Ashley told the logistics firm he wouldn’t be coughing up for any bills racked up before he bought the business.

As distribution ground to a halt, HoF pulled the plug on its website and cancelled all outstanding customer orders.

Next to go were some suppliers, such as Jigsaw and Mint Velvet, who objected to Ashley’s failure to pay for stock supplied under the previous owners and instead walked out of House of Fraser stores, taking their stock with them.

Discontent is also rife among some landlords. While industry sympathy for landlords may be limited, it is clear that House of Fraser’s landlords have been through the mill in recent months.

First, they were hit by a far-reaching CVA. Then came Ashley’s immediate appointment of property advisers CBRE. Ashley has said he intends to keep 80% of the estate open, but rental terms are as yet unknown.

And because House of Fraser entered administration before being purchased by Ashley, leases and rents are currently up for negotiation and any pre-existing agreement no longer stands.

Buildings are governed by a 12-month licence held by administrator EY and landlords would have to go to court to regain control of the buildings.

As revealed by Retail Week, a group of more than 15 are now in discussions with Ashley’s rival in the House of Fraser bid, Edinburgh Woollen Mill entrepreneur Philip Day, who is willing to pay more rent or even buy the buildings outright.

More than he can chew

An inoperative website, suppliers deserting it and landlords considering their options. As it stands, it looks like Ashley might finally have bitten off more than he can chew.

What’s more, the acquisition is hurting Sports Direct’s share price: the stock was worth 406.7p before Ashley acquired the business. It fell throughout last week as disaster after disaster hit House of Fraser.

And that followed shareholder concern that his previous dabbling in department stores – namely a stake in Debenhams – hit Sports Direct’s profits last year.

“If there is one thing the City and industry alike have learnt about Ashley, it is to never write him off”

And all this is before investors are even asked to consider the most audacious part of Ashley’s scheme – turning House of Fraser into a destination for luxury brands.

This isn’t as ludicrous an idea as it might seem to the casual observer – Ashley already has relationships with major players including Burberry, Dolce & Gabbana and Saint Laurent through Flannels, his premium fashion store.

But while those businesses recognise the opportunity in a small number of regional luxury boutiques, they are less likely to want their brand sitting downwind of 50 Sports Direct concessions, even taking into account its shiny newSelfridges of Sports’ look.

If there is one thing the City and industry alike have learnt about Ashley, it is to never write him off.

He is a force of nature who seems capable of riding almost any wave. But convincing Domenico Dolce and Stefano Gabbana to let him flog their wares alongside Donnay trackie bottoms might be too much of a stretch, even for the inimitable Ashley. 

Sports Direct City graph 21 August 2018