Frasers Group, owned by Mike Ashley, has increased its stake in online fashion retailer Boohoo to 9.1 percent as Boohoo’s shares hit their lowest value in eight years. Frasers Group, which already owns House of Fraser, Sports Direct, Evans bikes, Flannels, and Game, now holds over 115 million shares in Boohoo, worth approximately £38.3 million.
Boohoo’s shares have experienced a significant decline, dropping to around 35p compared to a high of over 400p in the summer of 2020. This has led some analysts to criticize Frasers Group for picking at the bones of businesses when they are down.
Frasers Group initially invested in Boohoo last June, taking a 5 percent share. At the time, the group expressed hope for potential collaborations between Boohoo and its existing brands, I Saw It First and Missguided, due to Boohoo’s focus on young female consumers.
Apart from Boohoo, Frasers Group has also acquired stakes in other retailers such as Asos, upmarket brand Hugo Boss, electrical retailer Currys, and online electrical firm AO World. Investment director Russ Mould from online stockbroker AJ Bell praised Frasers Group for its shrewd investment decisions.
Boohoo’s share price decline can be attributed to various factors, including a slowdown in growth due to the cost-of-living crisis, increased competition, and the preference for in-store shopping amidst the COVID-19 pandemic. Additionally, the fast fashion industry has faced scrutiny as more consumers prioritize ethical considerations and sustainability.
Frasers Group, with its reputation for strategic investment, has capitalized on this opportunity to increase its stake in Boohoo. Despite its preference for buying assets out of administration, the group has also shown interest in acquiring equity stakes in weak companies.
Boohoo has faced a challenging period, with its share price falling by over 73 percent in the past year. The company reported a loss of nearly £91 million for the year ending February 28, compared to a profit of £7.8 million the previous year, as sales declined by 11 percent. The easing of the pandemic-driven online buying boom and financial pressures on consumers have contributed to Boohoo’s struggle.
Frasers Group considers investments as an integral part of its strategy, aiming to complement its existing businesses and build a sector-leading ecosystem. The increased stake in Boohoo aligns with this strategy and demonstrates Frasers Group’s confidence in the fashion retailer’s potential for future collaboration and growth.
It remains to be seen how Frasers Group’s investment in Boohoo will shape both companies’ fortunes moving forward. With Boohoo facing multiple challenges, including changing consumer behaviors and growing sustainability concerns, collaborations and synergies between the two entities could play a crucial role in their future success.
This article presents a brief overview of Frasers Group’s increased stake in Boohoo and the reasons behind Boohoo’s declining shares. It provides insights into Frasers Group’s investment strategy and the challenges faced by the fast fashion industry. As both companies navigate a changing retail landscape, industry observers and investors will be watching closely to see how this investment pans out.
