Frasers Group PLC (LSE:FRAS) is “the Dick’s sporting goods of Europe” according to Shore Capital, which it believes should be a resilient performer heading into 2023.
Shore Capital held its ‘buy’ rating on Mike Ashley’s Frasers with a target price of 1,200p.
Analysts at the broker believe Frasers’ “diversification and the elevation strategies, coupled with tailwinds in luxury” should bolster its resilience.
Part of its elevation strategy is to widen its exposure to higher-end brands, such as Hugo Boss in which it has built a stake, making its offering increasingly appealing to more affluent customers
“Scale and geographic diversity allow for a very relevant range, helping consumers find a broader and more premium offer while helping Frasers maintain market share in sportswear.”
Additionally, the FTSE 100 retailer could “deploy up to £2bn on its geographical expansion in Europe putting it in a strong position to extend its presence and ‘own’ the sporting segment of the EU sportswear sector.”
Investments made in recent years, including the likes of Missguided and London tailor Gieves & Hawkes, position it well to weather any storm, with Shore Capital believing it can grow margins in tandem.
Roughly 14 acquisitions in the last five years have resulted in Frasers more than doubling its earnings per share.
Shore Capital said that Frasers is “owning the consumer sector,” even becoming Nike’s partner of choice in the sporting goods segment.
“With global exposure across many verticals in the consumer space and a strong balance sheet, we expect the group to cement its position as the most diversified player in the retail market.”
Looking forward, Shore Capital said that macro factors normalise and Frasers should reach a sustained level of profitability.
Analysts at the bank forecast revenue growth of 11.7% this year and roughly 10% next year.
Dick’s is the largest sporting goods retailer in the US, with over 850 stores and 50,000 employees.
Shore Capital suggests that Frasers has the potential to become the European equivalent of the US giant, which is also listed on the Fortune 500.