Last week it was revealed that Mike Ashley’s Sports Direct has bought a 4.8% stake in MySale, an online fashion discounter.

Last week it was revealed that Mike Ashley’s Sports Direct has bought a 4.8% stake in MySale, an online fashion discounter.

It is thought that Sports Direct’s investment into the Australian retailer is a bid to tackle the Australasian and Asian markets.

This is not an unusual move for Sports Direct. In January, the retailer bought a 4.63% stake in Debenhams, noting that it would like both companies to work together.

Sports Direct then sold its shares – making £5 million in process – and acquired the option to buy 6.6% of Debenhams using a complex financial arrangement.

This agreement gave Sports Direct the ability to influence Debenhams but without actually buying shares outright. The tactic has already proved to be successful for the sporting retailer: it was disclosed last week that Sports Direct will open a number of concessions in Debenhams’ stores.

Other similar moves from Sports Direct include its stake in House of Fraser, as well as its decision to take advantage of JJB Sport’s administration by purchasing part of the business in 2012.

What’s more, the retailer just announced it has taken ownership of a LA Fitness centre in Sale, Greater Manchester, demonstrating even more diversification and further collaborations.

Tie-ups such as these give Sports Direct the perfect opportunity to flex its significant financial and retail sector muscles.

Its stake in MySale is likely to give Sports Direct access to new markets, whilst the other agreements allow the company to learn from other retailers and gain information so that it doesn’t miss out on any new trends or new technologies.

Buying strategic stakes in fellow retailers has also enabled Sports Direct to discuss working more closely with their management teams, as we have seen with Debenhams.

This strategy is often far more successful and beneficial for a retailer compared with an M&A approach, which can often entail large operational costs.

By acquiring stakes in companies such as MySale and others, Sports Direct will be able to take advantage of an already established business, and thus reap all of the benefits associated with this low-risk route to market.

It still remains to be seen how Sports Direct will take full advantage of its stake in MySale but, if its previous ventures are anything to go by, it is likely that Sports Direct will work its magic to make sure that it benefits hugely from the venture.

  • Dan Coen, director, Zolfo Cooper