Mike Ashley’s spurned £83mn bid for luxury handbag maker Mulberry this month has not deterred his retail empire from acquiring yet another stake in a listed company.
On Friday, London-listed Frasers Group invested £10mn in UK ecommerce company THG — which runs websites such as Lookfantastic and Myprotein — in return for a small holding, as THG tapped investors for cash.
This latest move highlights the sportswear tycoon’s propensity for investing in companies of “strategic importance”, as Frasers calls them. But these financial interests — in brands as varied as luxury houses Mulberry and Hugo Boss, fast-fashion players Asos or Boohoo, and even white-goods seller AO World — have also confounded analysts.
The rationale for buying these stakes is not always clear and they can even be “a bone of contention with some investors”, as Jefferies put it in a recent note.
On occasion, they can become legally contentious: Frasers in May dropped a €50mn lawsuit in London against Morgan Stanley in which the UK group accused the Wall Street bank of “snobbery”. The litigation turned on the bank’s decision to cover derivative positions in Hugo Boss that Frasers held via its broker.
Frasers, formerly known as Sports Direct, typically invests “when the shares are downbeat or the market is downbeat about those shares”, said Anubhav Malhotra, consumer analyst at Panmure Liberum, “even if they have other angles in terms of providing services or maybe acquiring [them]”.
Ever since its own IPO in 2007, the FTSE 100 company has acquired stakes in suppliers and competitors such as Adidas and JD Sports, often as a way to gain or improve a trading relationship or secure a seat at the table should a company be put up for sale. Sometimes, as in the case of rival JD Sports, the stake is just to make a healthy return.
Since 2013, the group has had holdings in around 20 businesses, according to Jefferies. Frasers’ listed investments were worth about £500mn in the year to April 28, up from just under £300mn the previous year, according to its annual report.
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Ashley, who stepped back from the business in 2022 and handed the reins to his son-in-law Michael Murray, still owns about 73 per cent of the business. Murray, who is Frasers’ chief executive, has previously insisted that he is the ultimate decision maker, although people close to the group say he seeks the counsel of Ashley and other advisers on investments.
Frasers declined to comment for this article.
Malhotra added: “I don’t think they have any ambitions to own [all] the companies they have a stake in. At the moment, it’s only one or two maybe of those that they might end up owning. Mulberry is obviously one.”
Frasers’ conditional bid for Mulberry has led to rising tensions between two billionaires. In one corner is Ashley, whose retail empire owns about 37 per cent of the luxury handbag maker. In the other is Mulberry’s long-term majority shareholder, the Singapore-based Ong family, which holds a 56 per cent stake and who this month said it “has no interest in supporting the possible offer” from Frasers. However, since those remarks, patriarch Ong Beng Seng has been charged by Singaporean authorities as part of a corruption scandal. Ong did not immediately enter a plea.
Koo Aseeley, a partner at advisory firm Dow Schofield Watts, said that the recent change in Ong’s circumstances might influence his thinking. “If there is concern about how the case might unfold for him, it may well change his perception of any offer from the likes of Mike Ashley, Frasers Group or indeed anyone else.”
Late on Friday, Frasers said it had improved its conditional offer for Mulberry from £83mn to £111mn, and it was waiting for a response from the board.
Frasers, whose core sales-and-profit engine remains Sports Direct, first bought a stake in Mulberry in 2020 as part of the group’s broader strategy to “elevate” its brands, stores and offering.
The handbag label is a significant supplier to House of Fraser, the department store group also owned by Frasers, as well as to Flannels, its other chain that sells luxury brands. Frasers has until the end of the month to either make a formal bid for Mulberry or walk away.
Frasers has previously warned that as an existing Mulberry shareholder it would “not accept another Debenhams situation where a perfectly viable business is run into administration”.
The department store chain went into administration in 2019 having rejected a last-ditch rescue plan by Sports Direct as part of an acrimonious battle with the Debenhams board for control of the business.
Frasers was prompted to make the Debenhams comment after Mulberry noted a “material uncertainty related to going concern” in its annual report. Mulberry recently posted an annual pre-tax loss of £34mn, swinging from a £13mn profit the previous year, on a 4 per cent drop in revenue to £153mn.
Although some of Mulberry’s travails can be pinned on a broader slowdown in spending among affluent shoppers, Frasers also believes they are self-inflicted, according to people close to the group. They contend that a combination of chunky price increases and a decision to sell fewer products through wholesalers such as Frasers was to blame, too.
Mulberry declined to comment. In July, it appointed a new chief executive, Andrea Baldo, to turn it around.
Analysts at GlobalData said that Frasers, which also owns other brands such as Jack Wills, Evans Cycles and Game, should have the expertise to steer Mulberry back to profitability if it made a successful bid but warned about “its lack of previous success within the luxury market”. This refers to Matchesfashion, the online luxury marketplace it bought in December 2023, and which it then put into administration three months later.
Meanwhile, Frasers’ stakes in Asos and Boohoo could prove key as both brands are forced to fend off competition from new rivals such as Shein, which are able to charge low prices for clothes partly by shipping items in small packages direct to consumers from manufacturers in China.
“Frasers sees value in elements of these businesses which if they were to come up for sale in a break-up, sale or a merger, they may want to get involved in,” Malhotra at Panmure Liberum added.
Annual revenues at Shein’s UK operations surpassed £1.5bn last year, ahead of Boohoo, and similar to Asos.
Another important driver of Frasers’ stakebuilding is Frasers Plus, its fledgling credit and loyalty scheme, which it believes can be deployed by other retailers, including some of the brands it already has stakes in. THG already offers it to some of its customers.
Acquiring stakes “basically gives [Frasers] more opportunities to have those conversations,” Malhotra said, although “it doesn’t guarantee that those conversations will result in a fruitful relationship.”
