Men in sharp suits mix with models as Vogue editor Edward Enniful and fashion influencers sip champagne and Salty Dog cocktails while they peruse £525-a-pair bejewelled Jimmy Choo trainers at a glossy store on London’s Oxford Street.
This is Flannels, the achingly expensive designer emporium which Mike Ashley, the founder and chief executive of Sports Direct, views as the future of his retail empire.
Ashley himself is round the corner in the pub, sipping a pint. But working the floor is Michael Murray, Ashley’s future son-in-law, who the billionaire has made clear is in charge of turning his retail empire from pile-it-high joggers and hoodies to high-end brands and glitzy stores.
Murray, Sports Direct’s “head of elevation” who celebrated his 30th birthday on Friday, says he has hardly slept for two weeks after opening a flagship project in Leicester – which turned a former BHS shop into a Flannels, a USC store and a Sports Direct – and the London designer store.
“It has been pretty hectic and doesn’t look like slowing down any time soon,” Murray says.
The Doncaster-born son of a property developer began by helping Ashley with personal property deals a few years after meeting his daughter Anna on holiday in 2011.
He is now Ashley’s righthand man overseeing the revamp of Sports Direct stores as well as expanding Flannels, improving the group’s use of technology and building relationships with high-end brands.
Ashley is clearly impressed, though after 37 years running Sports Direct it is clear he is not at home in the world of £800 Gucci trainers and £1,250 Moncler coats.
At Sports Direct’s annual meeting in London on Wednesday, Ashley told shareholders not to buy anything in the Flannels store downstairs from the meeting room. “It’s eye-watering what some of the prices are for a pair of shoes or a cap,” he said.
But he does understand the numbers. He describes the elevation strategy as “a golden ticket” and says he would like to have 100 stores like the new Leicester outlet. “I would like to click my fingers and have 100 Leicesters tomorrow … God do they take some money,” he said.
Murray is not on the company’s board, or even an employee, but is employed as a consultant, paid 25% of any value he creates from property deals – a formula which has resulted in Sports Direct handing Murray more than £10.5m in the last two years. He not only earns more than the boss of Tesco, the UK’s largest retailer, but an astonishing sum compared with Sports Direct’s former most senior executives, such as retail chief Karen Byers and chief executive Dave Forsey who collected salaries of about £150,000 a year.
Murray says his payout is “a very fair deal for Sports Direct”. He adds: “It is up to the non-executives what I get paid. I don’t take a salary and there are no guarantees. I get paid based on property performance and everything else is technically thrown in.
“I oversee the future direction of the business and how stores look and what brands we should and shouldn’t be stocking.”
The old guard may have concerns at Murray’s heavy involvement in operations directed from the £108m Oxford Street building, which now includes a new London head office for the group and a new team and culture that is very different from that at the group’s warehouse and main office in Shirebrook, Derbyshire.
The group is moving further away from its roots with risky acquisitions including House of Fraser, which is losing more than £1m a week, and Jack Wills, the loss-making preppy brand. In July, the group admitted it could not put a figure on its future profitability as a result of the disastrous £90m buyout of the House of Fraser chain. It recently shocked investors with the revelation of a €674m (£600m) tax bill from the Belgian authorities.
While those that know him say Murray is bright and likeable, he is viewed as inexperienced by the old guard and part of a new, less cost-conscious culture at the business where once executives stayed in the Premier Inn and took budget airline flights. Long-standing former lieutenants who helped build Sports Direct, including finance director Jon Kempster and Byers, have now departed.
There are also rumblings over Murray’s influence over Ashley, who has clearly been very impressed with the strong performance of Flannels and improved Sports Direct stores which the younger man has overseen. “He clearly has Mike’s ear,” said one source who knows the company well, suggesting the pair thrash out business deals over drinks or dinner or on family holidays away from the wider management team. “He’s paying fortunes to someone unproven,” says another source close to the company.
Murray says his role is clearly defined.
“I’m thinking about the next 10 to 20 years. Me and Mike are working like a partnership. He looks after the back end – systems, logistics – I look after customer-facing side and the image of the business.”
That image does have its problems, he admits. Sports Direct has what he refers to as “hindrances” from its historic reputation, a reference to when Guardian reporters went undercover at the Sports Direct warehouse and discovered workers being underpaid and working in poor conditions: “It does definitely come with issues but you can’t have it all. In a couple of years time that will all be in the past.”
Asked if he’d like to run the whole show one day, Murray say it’s not his decision. But he says: “The business is rapidly transforming. We only started elevating two or three years ago. With the amount that has been achieved or is being achieved it is not necessary to break a winning formula.”
He admits that House of Fraser has been “difficult to integrate” and that some stores are likely to close. But he says the group still plans to open five revamped House of Frasers next year – which will be rebranded as Frasers – and they will then decide how many to keep long term. “We fully believe in it and [are] willing to invest significant amount of money,” he says.