Retail giant Frasers Group lowers Hugo Boss stake

Frasers Group lowers Hugo Boss stake after German fashion giant’s shares climb by nearly 30% in two months

  • Mike Ashley’s retail empire said it now directly owns a 3.9% share in Hugo Boss
  • Frasers Group’s highest potential financial exposure to the firm is now c.£580m
  • Hugo Boss shares have increased by approximately 28% in the past two months

Frasers Group has reduced its stake in Hugo Boss just two months after announcing it had upped its position in the fashion giant to over a third.

Mike Ashley’s retail empire said it now directly owns a 3.9 per cent share in the upmarket fashion brand, down from 4.3 per cent, while the additional interest held through put options has been cut from 28.5 per cent to a quarter.

Put options are contracts that allow their owner to sell an asset at an agreed price, known as the strike price, and are bought in the belief that the underlying security’s value will decrease.

Holding: Mike Ashley’s retail empire Frasers Group said it now directly owns a 3.9 per cent share in Hugo Boss, down from the 4.3 per cent that it previously held

Back in early November, the FTSE 100 company declared that its holding in Hugo Boss had increased to 34.3 per cent, giving it a maximum exposure of about €1billion (£875million).

Hugo Boss shares have grown by approximately 28 per cent since that time, when it reported a record quarterly performance and recovery in sales across all regions.

Considering the premium that Frasers will earn should its put and call options be exercised, its highest potential financial exposure to the business is now around £580million.

The Derbyshire-based apparel retailer has been gradually building up its ownership of the fashion house in the past two-and-a-half years, after first buying a 5 per cent stake in June 2020.

At the time of that initial investment, which came during the first few months of the Covid-19 pandemic, it said the deal was motivated by a ‘belief in Hugo Boss’ long-term future.’

In the 2020 financial year, Hugo Boss’s total sales slumped by nearly a third to €1.95billion as fashion shops across the world were forced to temporarily shut, and the transition to remote working weakened demand for office attire.

Turnover rebounded by 43 per cent the following year, though, as lockdown restrictions were loosened and people worked from home less often. The company has predicted that revenue will rise by a further 25 to 30 per cent in the 2022 fiscal year.

Frasers Group’s interest in the German business has come alongside a flurry of acquisitions and investments in recent years as part of its ‘elevation without limits’ strategy. 

Three weeks ago, it announced the £47.5million purchase of stakes in 15 brands, including Pretty Green, founded by former Oasis singer Liam Gallagher, Rascal Clothing and Nicholas Deakins, from its long-time rival JD Sports. 

The Sports Direct owner regularly eyes up firms that are on the verge of collapse or have fallen into administration, such as womenswear seller Missguided, online retailer Studio Retail and DW Sports Fitness.

It has also become the fourth-biggest investor in ASOS, whose shares have plunged by about three-quarters in the past 12 months as the cost-of-living crisis has led shoppers to reduce their apparel orders.

Frasers Group shares were 0.3 per cent, or 2p, lower at £7.59 just before trading closed on Friday afternoon.