- Sports Direct-owner to repurchase further £80 million shares
- Frasers has slipped outside of UK’s top 100 listed firms
- Retail conglomerate remains misunderstood
Shares in Frasers (FRAS) firmed 3.2% to 794p after the Mike Ashley-controlled retail conglomerate announced a new £80 million buyback ahead of possible relegation from the FTSE 100 in next month’s quarterly reshuffle of the blue-chip index.
The Shirebrook-based owner of the Sports Direct, House of Fraser and Flannels chains is taking action to shrink its share count and boost the stock price having slipped to number 107 in the UK market cap rankings, despite posting a respectable one-year share price return of 17%.
FRESH BUYBACK BOOST
Investors responded positively to a short statement from Frasers, which unveiled plans to buy back up to 10 million shares for a maximum of £80 million from today up to and including the last trading day before its 30 April 2023 year end in order to ‘reduce the share capital of the company’.
Frasers doesn’t pay a dividend, but it does return capital to shareholders through its preferred mechanism of share buybacks.
Indeed, the retailer bought back £80.4 million of shares in the half to 23 October 2022 alone, representing 2.5% of the share capital, which management regards as a ‘demonstration of our commitment to shareholder returns, our confidence in the group and the strategy for future growth’.
WHY IS FRASERS MISUNDERSTOOD?
As Shares explained here in January, Frasers remains best-known as the company behind value-for-money trainers and tracksuits seller Sports Direct.
What’s still underappreciated is how the business has moved way beyond its sporting goods roots to also become a premium and luxury retail powerhouse with attractive prospects under CEO Michael Murray, Ashley’s son-in-law.
Present-day Frasers is a collection of the world’s most iconic brands and offers three core pillars - sports, lifestyle and luxury - through different banners including Sports Direct, luxury designer fashion chain Flannels and department store House of Fraser.
The sportswear-to-luxury brands group has also taken strategic stakes in companies ranging from high-end handbags group Mulberry (MUL:AIM) and German fashion brand Hugo Boss (BOSS:ETR) to ASOS (ASC) and N Brown (BWNG:AIM), interests which create new opportunities by allowing Frasers to develop relationships and partnerships with other retailers, suppliers and brands.
While many investors still mistake Frasers as a seller of cheap footballs, basketballs and running shoes, today’s Frasers is a best-in-class retail conglomerate working with top brands such as Nike (NKE:NYSE), Adidas (ADS:ETR),Skechers and Moncler (MONC:BIT).
In fact, the company is focused on ‘elevating’ its proposition by smartening up its stores and tightening its supplier relationships to receive a better product allocation from the world’s winning brands.
Shore Capital makes the point that like the well-managed Dick’s Sporting Goods (DKS:NYSE) in the US, Frasers is becoming Nike’s ‘partner of choice’ in the European sporting goods market and is benefiting as the big footwear brands rationalise their wholesale accounts.
