Retail therapy: Mike Ashley goes bargain hunting in Dundee

These two developments are in some ways different sides of the same coin. Catering primarily to older shoppers who don’t want to travel into city centres or shop online, M&Co was undoubtedly fighting a losing demographic battle, yet ultimately history will most likely consign it to the long list of retailers felled by the Covid pandemic.

Mike Ashley (Image: PA)

The loss of former giants such as Debenhams, the Arcadia stable of Topshop, Topman and Miss Selfridge, and dozens upon dozens of others hollowed out many a high street and shopping centre which in turn sent the value of these properties plummeting. This is where Mr Ashley steps in. Widely known for driving the hardest of bargains, the owner of Sports Direct and former owner of Newcastle United football club is said to be looking to pay a fraction of the former value of Dundee’s main shopping centre.

Mr Ashley has grown his influence in the retail industry in recent years by taking stakes in chains such as USC, French Connection and Blacks. He purchased what was then known as House of Fraser for £90m after the 169-year-old department store collapsed into administration in 2020. Frasers now has stakes in Asos, Hugo Boss and N Brown.

In addition to Newcastle United, Mr Ashley has also had boardroom dealings with Rangers FC. Latest accounts from the Glasgow sporting giants show that the club paid out £8.25m last year to sever relations with the Sports Direct owner.

READ MORE: Rangers loses right to £2.8m of merchandise income due to Mike Ashley legal block

In 2000 Mr Ashley handed over to the Office of Fair Trading evidence of business meetings by sports retailers to fix the price of football shirts. Sixteen years later he was called before the Business, Innovation and Skills Committee to answer questions from MPs about working conditions in his Sports Direct warehouses, including claims that he paid less than minimum wage.

Given his renowned parsimony, sources have been quoted as saying there is “no guarantee” that the foray into shopping centres will go ahead. But as things stand, Frasers is thought to be in “advanced talks” on a £30 million deal to buy the Overgate along with the £70m acquisition of The Mall in Luton.

If so, the Overgate transaction would represent a significant loss for current owner Legal & General which bought the centre nine years ago from commercial property investment heavyweight Landsec for £125m. Mr Ashley and his son-in-law Michael Murray, who has taken over as chief executive of Frasers, are banking that the fall-out in the sector is stabilising.

Rangers fans gathered outside the club's superstore in 2015 to protest the involvement of shareholder Mike Ashley (Image: Bill Murray/SNS)

Perhaps so, but the messages at the moment are certainly mixed. Supermarket groups and the likes of Marks & Spencer and Next issued buoyant festive trading updates last month, while more recently the owners of Glasgow’s Silverburn announced a number of new leases along with a deal to renew with Next.

The Scottish Retail Consortium (SRC) reported that total sales across the country were up by 11.3 per cent in December on the same period a year earlier. Even after stripping out the impact of double-digit inflation, sales were 3.9% higher, the best outcome recorded in three years.

Yet across the UK as a whole, sales volumes fell by 1% month-on-month in December, confounding expectations of a 0.5% rise as the cost-of-living crisis began to bite. And despite the better outturn in Scotland, SRC director David Lonsdale has warned that retail is “far from being out of the woods”.

READ MORE: Will consumers pay price for Christmas sales bonanza?

“It’s an industry in transition with retailers navigating their own cost crunch, cash-conscious consumers, and the twin challenges of the economic legacy of Covid and inflationary pressures,” he cautioned last month.

“With the spotlight turning to the year ahead the fact is many of these headwinds remain, requiring policymakers to show dexterity towards keeping a tight lid on the regulatory costs under their control.”

Even the seemingly invincible Amazon is feeling the inflationary stress, having said in January that it is closing three UK warehouses with the loss of 1,200 jobs, including 300 in Gourock. The announcement came just days after the e-commerce giant said it would axe 18,000 jobs from its global workforce – the largest number in its history – due to economic uncertainties.

It could be argued that the shift towards online retailing that dramatically accelerated during the pandemic is abating as consumers re-discover the joy of tangible shopping. There is an element of truth to this, but the reality is that digital will be a key priority in the new landscape.

READ MORE: Amazon to close Gourock plant with loss of 300 jobs

Almost solely reliant on high street footfall away from main retail locations, M&Co was too late to the online revolution. Even Primark, which for years dismissed digital, is now working on a strategy to connect the journey between searching online and actual stock in stores.

So the question is whether this will all translate into the rebound for shopping centres that Mr Ashley is betting on.

According to data from MSCI Real Assets, about £8 billion has been wiped off the value of UK shopping centres since June 2018, a decline of 67%. At the price of £30m that is being suggested, the value of the 420,000sq ft Overgate has fallen by 76% since it was bought by Legal & General in 2014.

Even in the face of prevailing headwinds, that looks good value for money. Throw in the potential synergies with Mr Ashley’s existing retail portfolio – much of which was acquired in distress sales – and this looks a classic play from the Sports Direct tycoon.