Debenhams today said it was disappointed in Mike Ashley’s decision to call a shareholder meeting in which he hopes to take over the day-to-day running of the department store. The multichannel department store, which issued a profits warning earlier this week, has suffered from an uncertain economic environment in which shoppers are cutting back on spending in the light of Brexit and, when they do shop, are tending to buy more products online than previously. Department stores such as Debenhams, a Leading retailer in IRUK Top500 research. are predominantly feeling that change in behaviour.
The move is the second significant corporate action of the week for Mike Ashley and Sports Direct International, which on Monday embarked on a mandatory takeover offer for Findel after it increased its stake in the business to more than 36%.
The latest twist came when Sports Direct International, which is led by Mike Ashley, last night said in a stockmarket statement that having called a shareholder meeting, the plan was to remove all the current members of the Debenhams board, except September 2018 appointment Rachel Osborne. It would then appoint Ashley to an executive role in the business, where he “would focus on building a strong board and management team.”
If this happens, said the statement, Ashley would step down from his role as chief executive and director of Sports Direct and be replaced by Sports Direct deputy chief financial officer Chris Wootton as acting chief executive.
“Sports Direct wishes to reassure its shareholders that, if Mr Ashley were to be appointed to the board of Debenhams and step down from his roles at Sports Direct, Sports Direct and Mr Ashley have every confidence that acting chief executive Mr Wootton and the other members of Sports Direct’s board and management team have the necessary expertise to continue to successfully run the Sports Direct business.”
A fuller statement is expected “in due course’ from Sports Direct on its thinking around the move.
Today, Debenhams said in a statement that any shareholder holding more than 5% of the issued share capital - and Ashley has 29.7% - was entitled to call a shareholder meeting.
It added: “The board has been engaging with Sports Direct and our other stakeholders regarding options to restructure our balance sheet and is disappointed that Sports Direct has taken this action. In the meantime, discussions to address our future funding requirements are well advanced.”
But the retail design agency that designed the original flagship Debenhams store on Oxford Street in the 1990s says that Ashley needs to sharpen the axe.
Aaron Shields, executive strategy director at branding and design agency Fitch, said: “Take any person under the age of 30 into Debenhams and observe their reaction. Get them to describe what this store is for, and their blank expression will tell you everything you need to know.
“Department stores like John Lewis have raced to meet customer demands, building billion-pound online businesses, revitalising their assortment and brand image while repurposing their channels – shutting underperforming stores and making many hard choices.
“Debenhams has purposely decided to walk, not run. The store experience is antiquated, product assortment is bloated, store network performance is variable and online performance is middling at best. As a result, Debenhams is no longer top-of-mind during normal shopping visits. Poor Christmas figures now clearly demonstrate that customers aren’t thinking about Debenhams during special occasions.
“Mike Ashley needs to sharpen the axe and force these kinds of decisions through, like other retailers. It’s a great brand in serious need of rescue.”
Our view: So far this year, Sports Direct Group has taken over House of Fraser, Evans Cycles and sofa.com and has also made an offer for Findel, owner of value websites ace.co.uk and studio.co.uk. Sports Direct has a 29.7% stake in Debenhams that is just lower than the 30% threshold at which the company would be required to make a takeover offer (as it has been with Findel). Instead, it seems the play is to take over the running of the board instead. Whether the move will be successful remains to be seen. How Ashely would run Debenhams is also unclear. Also up for question are how Chris Wootton would run the enlarged Sports Direct International, with all the companies that it has already bought this year. Interesting times lie ahead.
Image courtesy of Debenhams