Frasers Group has extended its stake in Boohoo to 9.1 per cent after shares in the online fashion retailer dropped to their lowest value in eight years.
Mike Ashley’s group – which owns House of Fraser, Sports Direct, Evans bikes, Flannels and Game – has grown its holding in Boohoo from 7.8 per cent, and now holds more than 115 million of its shares, valued at around £38.3 million.
Shares in Boohoo were around 35p this morning, compared to a high of more than 400p in the summer of 2020. One analyst said Frasers was developing a reputation for “picking at the bones of businesses when they are down”.
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Derbyshire-based Frasers first invested in Boohoo last June, initially taking a 5 per cent share, saying at the time that it hoped the move would lead to collaborations between the fashion group and its existing brands I Saw It First and Missguided.
Back then it said: “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.”
It also revealed in June that it had built up an 8.9 per cent stake in electrical retailer Currys, adding to its holding in online electrical firm AO World. Frasers also has stakes in Asos and upmarket brand Hugo Boss, among others.
Russ Mould, investment director at online stockbroker AJ Bell, said Frasers had been shrewd when it came to investing in other retailers.
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He said: “With many people focused on finishing up their summer holiday or making sure they’ve got everything ready for their children returning to school, some dealmakers have taken advantage of the relatively quiet market conditions to pick up shares.
“Dresses-to-tops specialist Boohoo has seen its share price fall 91 per cent since April 2021 after its success story derailed.
“Growth has slowed, with sales being hit by the cost-of-living crisis, while it has faced heightened competition and the business has struggled with intense cost pressures.
“More people have gone back to shopping on the high street since the end of the pandemic, preferring to try on clothes before buying rather than ordering them blindly off the internet. That’s hurt online-only sellers like Boohoo.
“Furthermore, the fast fashion business has come under scrutiny as more people make ethical considerations and try to avoid buying items that might be cast away after one use.
“Mike Ashley-founded Frasers has developed a reputation for being a vulture – picking at the bones of businesses when they are down.
“While buying assets out of administration is its preferred modus operandi, it also likes buying equity stakes in companies when their shares are weak.”
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Frasers Group, majority owned by former Newcastle United boss Mr Ashley, said earlier this year that investments were “a core part” of the company’s DNA.
It said: “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.”
Its stake buying in Boohoo follows a difficult recent time for the fashion brand, which has seen its share price collapse, down more than 73 per cent in the past year.
Boohoo sunk to a loss of almost £91 million in the year to February 28 from a profit of £7.8 million the prior year, after sales slipped by 11 per cent.
It has been hit as the pandemic-driven boom in online buying has eased off, with its customers also under pressure amid the cost of living crisis, while trading has been impacted by surging return rates.