Mar 25, 2023
£100 Million Man Has Big Goals for Mike Ashley’s Retail Empire
(Bloomberg) -- Michael Murray isn’t taking a salary to run Frasers Group Plc, but the prospect of a £100 million ($122 million) bonus if he doubles the share price of the British retailer is incentive enough.
The 33-year-old, who became chief executive officer last year, will receive the bumper award if shares of the owner of the Sports Direct chain reach £15 and stay at or above that level for 30 straight days by October 2025. The price is currently less than half of that level, showing the scale of the challenge.
“If I wasn’t motivated to hit the £15 share price I maybe shouldn’t be here,” Murray said in an interview at the new Sports Direct store in Manchester, England.
The five-story Manchester flagship — which boasts big, bright spaces and an array of global brands, from Nike to Adidas and Under Armour — is a showpiece in Murray’s effort to elevate the retail empire of his father-in-law, Mike Ashley. Murray aims to refurbish the “vast majority” of Sports Direct’s more than 470 stores by 2028, even as sky-high inflation makes the revamp more costly.
His appointment as CEO marked a distinct shift for a company once pilloried in a parliamentary report for its treatment of warehouse staff and whose founder had an acrimonious relationship with the City, media and even the government, initially defying an order by then Prime Minister Boris Johnson to shut non-essential stores early in the pandemic.
Once viewed as merely the boyfriend of Ashley’s daughter, Murray is now seen as the executive best able to lift Sports Direct beyond its long-standing pile-it-high and sell-it-cheap approach. The company has its sights on a bigger share of a more sophisticated European sportswear market that’s forecast to grow above 5% a year to €106 billion ($114 billion) by 2026, according to GlobalData.
Read more: Sports Direct Eyes European M&A Starting With France’s Go Sport
The strategy is showing signs of progress. Frasers reported its highest profits ever last year and forecast another record of at least £450 million this year. On two occasions in the past 12 months the stock approached £10, the threshold at which staff members could share a separate £100 million bonus pool.
Murray, who embraces social media, comes across as more measured than Ashley, who once made headlines for calling on the board of retailer Debenhams to take lie-detector tests.
One of the youngest CEOs in the FTSE 100, Murray epitomizes the fitness-first, aspirational lifestyle of the customers Frasers is trying to woo. He never misses his 7 a.m. workout and, on a tour of the Manchester store, carried a bottle of water to stay hydrated.
Frasers said last year that Murray would waive his £1 million base salary for this financial year, which ends in April.
Ashley, who is 58, stepped down from the board last year, months after handing over the CEO role, but still owns about 70% of the company. As such, he will always be the final decision maker at Frasers, said Tony Shiret, a retail analyst at Panmure Gordon. Yet the mercurial founder isn’t as hands-on as some might expect, giving Murray some room to act, he added.
“With Mike, the key thing has always been that he has to trust you,” said Shiret. “Either you’re with him or you’re against him. Clearly, he trusts Michael Murray and he’s made a good start.”
Murray grew up in Doncaster, northern England, and as a teenager organized parties for other under-18s. He went on to run an events business before following in his property-developer father’s footsteps, advising Frasers on its retail real estate. Before becoming CEO, Murray spent about three years as head of elevation at Frasers, studying each part of the business.
He married Ashley’s daughter Anna last year at Blenheim Palace, a grand country house in southern England, and they have two children.
The Sports Direct upgrade isn’t the only transformation he’s overseeing. Murray is opening new Flannels stores carrying luxury brands such as Gucci and Dolce & Gabbana, including a seven-floor outlet in Liverpool last year.
There’s also the downsizing of the House of Fraser chain that Ashley rescued in 2018, pledging at the time to make it the “Harrods of the high street.” After rebranding as Frasers, the retailer has been shrinking its sprawling stores, some as large as 300,000 square feet (28,870 square meters).
Eight new-look shops have opened and Murray aims to unveil as many as five each year. He describes Frasers as “less of a department store, more of a lifestyle platform,” and envisages a maximum of 35 outlets, compared with almost 60 when House of Fraser was bought.
His comments come as Britain’s well-loved department store, John Lewis Partnership Plc, faces scrutiny for seeking to potentially bring in an outside investor, running the risk of diluting its cherished partnership model.
“The global department store industry is suffering and is failing, and it’s lacking investment because the space is too big,” Murray said. “You’re on a bit of a death spiral where you need to cut the space down and make more productive stores and that’s what we’ve been doing with Frasers.”
Asked whether Frasers could invest in John Lewis, Murray said he’s “not currently looking at it.”
His approach to acquisitions so far has followed the Ashley playbook. Since he took over, Frasers has bought Savile Row tailor Gieves & Hawkes and online businesses Missguided, Amara Living and Studio Retail Group, while increasing its stakes in Hugo Boss AG and Asos Plc. It’s now showing interest in France’s Go Sport chain, which went into receivership in January.
The two men speak once or twice a day and Ashley works for the company about two days a week, though Murray stresses it’s on details like warehousing and logistics.
“When we’re speaking it’s more about opportunities and bouncing ideas off one another,” Murray said. “But it’s me driving the car and him doing the detail on the back end.”
--With assistance from Deirdre Hipwell.
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