Mike Ashley's Frasers Group PLC (LSE:FRAS) has been downgraded by RBC Capital Markets as shares in the owner of Sports Direct, House of Fraser and Evans Cycles are now seen as having little valuation upside.
The rating was cut to Sector Perform from Outperform, with analyst Richard Chamberlain saying the retailer’s strong operational diversity and resilient model are now largely reflected in its share price.
Following a 24% year-to-date rally in the shares, Chamberlain said there is “less valuation upside” compared with peers such as Dunelm.
On the positive side, he has removed a previous 'speculative risk' tag due to the group’s financial strength and said the group's financial services arm appears to be bottoming out, with profitability expected to stabilise after a £40 million decline in the 2025 financial year.
The analyst also noted green shoots in Frasers’ luxury and premium division through contemporary lifestyle brands like Represent and Casablanca, alongside increased investment in its top five own brands – Everlast, Jack Wills, USA Pro, Slazenger and Karrimor – which together account for more than half of own-brand sales.
RBC values Frasers at around 800p per share, or 7.5x times on an EV/EBIT basis, highlighting that limited liquidity and structural complexity may continue to constrain its valuation.