Putting aside the ballyhoo surrounding Frasers Group PLC (LSE:FRAS)’s ongoing spat with Boohoo Group PLC (AIM:BOO)’s board, the high-street retailer is facing a number of issues that has led to a downgrade from broker Shore Capital.
Shore Cap moved the Sports Direct owner’s share rating from ‘buy’ to ‘hold’, reflecting concerns over declining revenues in some segments and increasing business complexities.
Analysts acknowledged the strong performance of Sports Direct in the UK and internationally, alongside growth potential in the FLANNELS luxury retail chain.
However, a revenue decline in key areas, including GAME, GAME Spain, Studio Retail, and House of Fraser, offset these gains.
Frasers is pursuing an aggressive acquisition strategy, with recent deals in regions including South Africa, Benelux, Australia, and North Africa, noted Shore Cap.
Analysts said: “With a history of successfully driving value from acquisitions, we see these as a positive route to expanding the company’s international footprint.
“However, these opportunities will take time to realise so we remain cautious in the short term.”
Shore Cap revised its fair value for Frasers to 675p, leaving an 8% upside potential from current levels.
The company’s net debt stands at £725 million, which is manageable at 0.9x EBITDA, but reflects the financial weight of its growth strategy, analysts added.
Frasers shares were swapping for 618.5p each at the time of writing.