Ashley Pulls Plug on Almost Half of Debenhams Concessions

(Bloomberg) -- Sportswear billionaire Mike Ashley has closed almost half of Sports Direct International Plc's concessions in the stores of struggling U.K. department store operator Debenhams Plc as he pursues a more selective retail strategy.

Ashley has shut four Sports Direct concessions including two in the Debenhams flagship on London's Oxford Street, a spokesman for the department store operator confirmed. Sports Direct now has just five outlets remaining in Debenhams stores across the south of England.

Sports Direct's rapid growth was historically built on a “pile it high, sell it cheap” approach to retailing, but now Ashley, the company's founder and chief executive officer, wants to appeal to more affluent shoppers. He's focusing investment on new, larger sites in the hope of persuading the likes of Nike Inc. and Adidas AG to supply Sports Direct with their top lines.

The closures came “as a direct result of overlap with locations for future or current flagship stores,” a Sports Direct spokesman said by email. “We remain committed to developing our relationship with Debenhams.”

Ashley's move scales back a partnership that began abruptly in 2014 when the billionaire acquired a 4.6 percent stake in Debenhams. Ashley subsequently pressured Debenhams management into filling excess space in some stores with Sports Direct outlets.

Ashley has been increasing the size of his Debenhams position this year and now has a stake of about 21 percent through a combination of shares and derivatives.

As more shopping moves online, Debenhams has filled excess space in its stores with restaurants and cafes, as well as concessions from other clothing brands. Analysts expect the company's pretax profit to drop by 19 percent this year due to rising costs and stagnant demand.

To contact the reporter on this story: Sam Chambers in London at schambers7@bloomberg.net.

To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, Thomas Mulier, Tom Lavell