Frasers Group: What Mike Ashley’s retail empire’s endgame could be after Boohoo, Asos, Currys, AO and N Brown investments

Frasers Group’s “love for a bargain” has seen it snap up sizeable stakes in a range of retail brands listed on the London Stock Exchange.

The latest investments came this week when the Derbyshire-headquartered giant, which was founded by billionaire Mike Ashley, increased its shareholding in fast-fashion group Boohoo to 22 per cent. It first bought shares in June 2023 and became its largest single shareholder in October, passing co-founder Mahmud Kamani.

The group has also upped its stake in Boohoo rival Asos to almost 26 per cent and is now within touching distance of also becoming its largest single investor.

But these two brands are far from the only two that the retail giant, which was formally called Sports Direct until a rebrand a few years ago, has bought sizeable stakes in over the last 18 months or so.

In June 2023, the group bought almost 20 per cent of Bolton-headquartered white goods retailer AO in a £75m move, which has since been upped to 23 per cent to make it AO’s largest single shareholder.

Frasers Group has also built a large shareholding in JD Williams, Jacamo and Simply Be owner N Brown after first acquiring a 4.5 per cent stake in October 2022.

It now holds almost 20 per cent of the Manchester-headquartered retailer, placing it second behind largest shareholder Lord David Alliance.

At the same time it first acquired shares in Boohoo, Frasers Group also took the opportunity to buy into electricals retailer Currys and now holds just over 11 per cent of its shares.

A ‘ferocious appetite to pick at the bones of companies’

What all these companies have in common is their share prices at the time Frasers Group first made its move.

The likes of Boohoo and Asos saw their share price surge during the height of the Covid-19 pandemic as online shopping dominated while the UK was in lockdown.

However, as the high street returned to near normal conditions, these brands saw their share price slashed while investors were also turned off by a series of profit warnings and disappointing trading results.

It might be an easy assumption to make that Frasers Group has made these huge investments in order to one day take full control of these companies. But that would be “wrong” according to a top AJ Bell analyst who argues the moves are “principally about engaging with a competitor’s management and seeing how it can learn from them and find ways to collaborate”.

Dan Coatsworth said: “Frasers loves a bargain, both in terms of selling high volumes of goods at cheap prices via Sports Direct as well as taking equity stakes in businesses when they have fallen in the gutter. It just can’t help itself when a quoted retail business has experienced share price weakness.

“Frasers seems capable of spotting hidden value in almost every entity and that’s why it has such a large portfolio of equity investments.

“It would be wrong to assume these investments are a precursor to full takeovers. Instead, they are principally about engaging with a competitor’s management and seeing how it can learn from them and find ways to collaborate.

“For example, its 23 per cent stake in AO purchased last year has facilitated conversations between the two companies about how Frasers can benefit from AO’s knowledge in two-man delivery and electricals.

“Remember that Frasers sells bulky sports equipment through Sports Direct and three-piece suites through its Sofa.com brand, so any way to improve deliveries could be a big win, while it sells electricals through House of Fraser.

“The stake in Boohoo looks to be a way of Frasers getting its products distributed through more channels and getting more third-party goods into its own stores.

“Frasers’ brand I Saw It First is a perfect match for Boohoo and it has been exploring ways to collaborate.

“In a similar vein, keep a close eye on Frasers’ relationship with Shein, having recently sold the Missguided brand to the Chinese retailer.

“Shein recently struck a deal with the owner of Forever 21 in the US, with each party taking an equity stake in the other. Shein is now selling a co-branded clothing line that is primarily sold on its website.

“It now also has a way for buyers to return online orders in stores by utilising Forever 21’s shop network. One can only imagine that Frasers would love a similar deal and it has already flagged talks about a potential collaboration with Shein across its brand portfolio.

“Frasers’ style is not to make takeovers unless it can pay rock bottom price and that means waiting until they effectively go bust.

“Over the years it has shown ferocious appetite to pick at the bones of companies when they go into administration, acting like a vulture which hasn’t eaten for days.

“This implies we should not expect takeover bids for Boohoo, AO and other current investments such as Mulberry and Asos despite Frasers owning a sizeable chunk of their equity. These businesses might be experiencing some pains but they are certainly nowhere near danger territory.

“Despite the logic around strategic conversations, it’s worth considering that Frasers might simply view some investments as a way to make a quick buck – a chance to buy shares on the cheap and then flip them should the investee company see an improvement in trading.”

A ‘theme-park for the retail experience’

To help explain what Frasers Group’s strategy is and what its ultimate aim is, an expert at the University of Salford’s business school points to two quotes from chief executive Michael Murray.

Dr Gordon Fletcher, associate dean of research and innovation at Salford Business School, highlight’s the CEO’s desire for the group to become the “number one sports retailer in EMEA” and to create a “sector-leading ecosystem” across retail..

Dr Fletcher adds that this “does not just mean owning leading High Street brands but bringing them all altogether into a High Street experience owned by the Frasers Group”.

He said: “The Frasers Group is growing and as it takes on a new shape it has the potential to define a key moment in the history of the High Street.

“Over the last 12 months, Frasers Group has increased its stake in Boohoo and in Asos. A potential bargain as both these online retailers have share prices hovering around their historic low after the highs of the Covid period.

“There is also the increased investment and strategic partnership with AO World in September. Considered separately these online retailers duplicate many of their backend functions, driving up operating costs and even competing against one another, but as part of a larger retailer empire there is a potential new future for all three

“Frasers have also been buying up bricks and mortar. The high end Matches and Essex retailer Zee & Co both became part of the group in December.

“From Sports Direct to House of Fraser the group now covers brands that cover the full spectrum of consumer preferences.

“And it is not just retail in the UK that is the target of these activities. After increases in their stake late last year the German sports retailer SportScheck has also become part of the group along with 20 stores in the Netherlands from Unlimited Sports.

“Two key quotes from Fraser’s CEO Michael Murray help to explain what is happening. The goal of becoming the ‘number one sports retailer in EMEA’ positions the new European retailers as part of a wider plan to dominate this part of the sector.

“But these actions are also part of a plan to create a ‘sector-leading ecosystem’ across retail. This does not just mean owning leading High Street brands but bringing them all altogether into a High Street experience owned by the Frasers Group.

“A type of theme-park for the retail experience. The Fraser’s concept stores that are starting to appear present a taste of the future.

“With The Mall in Luton and Dundee’s Overgate Centre now part of the group’s real estate portfolio and Sheffield’s Meadowhall a further potential target for purchase, the future high street could be Fraser’s high street all presented within the protective space of the nearest shopping centre.”

‘We have a clear strategy’

In response to a request to comment, Frasers Group’s media representative pointed City AM towards its statement on the giant’s investments in Boohoo and Curry’s which it issued to the London Stock Exchange in June 2023.

At the time, Frasers group said: “Driving growth through strategic investments is a core part of Frasers’ DNA.

“Under Michael Murray’s leadership, we continue to build on our long track record of establishing supportive shareholder positions in attractive retail companies.

“We have a clear strategy to identify opportunities to invest in businesses which complement our existing sport, premium and luxury businesses, or help us to build and further utilise our sector-leading ecosystem.

“Boohoo is an attractive proposition to us with its laser focus on young female consumers. We see potential synergies and an opportunity to strengthen our own brand proposition in collaboration with Boohoo, most obviously with Frasers Group brands I Saw It First and Missguided.

“Our investment in Currys provides us with a valuable opportunity to build on our foothold in the electricals industry as well as deepening the existing relationship between Currys and Studio, with the potential for further collaboration between the two.

“Through this investment, we also believe Currys will benefit from Frasers’ deep retail know-how and our sector-leading ecosystem.”

Frasers Group has since sold Manchester-based Misguided to Shein.