Mike Ashley’s Frasers Group PLC (LON:FRAS) has snapped up a 12.5% stake in luxury handbags maker Mulberry Group PLC (LON:MUL).
Frasers, which changed its name from Sports Direct International in December, did not say what price it had paid, but Mulberry’s shares closed on Friday at 240p and had risen to 250p by the end of Monday’s trading.
READ: As Sports Direct becomes Frasers are Ashley's plans pantomime or golden goose?
Mulberry has lost three quarters of its market value over the past two years.
Ashely has a penchant for taking stakes in troubled retail and sports brands, but this is a much more upmarket outfit as the magnate looks to continue his "elevation" strategy to raise his offering up and away from his traditional pile-em-high-sell-em-cheap model.
While Mulberry is definitely at the luxury end of the market, half-year results in November showed it racked up a loss before tax of £10.9mln, around 25% higher year-on-year, with revenue broadly flat at £68.9mln.
House of Fraser, which Frasers acquired from the administrators for £90mln in August 2018, has been an important partner for Mulberry, with its stores containing most of the luxury’s group’s concessions outside of London and around 40% of Mulberry’s total UK outlets at the time of the HoF administration.
Analysts at Liberum said the move forms part of the elevation strategy "and building stronger relationships with premium third-party brands", with Mulberry holding potential to "play an important role" in the rolling out its Flannels chain.
"Unlike Frasers’ past deals, being focused on companies coming out of administration, Mulberry is a very strong brand coupled with a cheap valuation has sparked the group's interest.
"It is very much in keeping with the group’s over-arching strategy – one with long-term potential that we think that the market under-appreciates.
"The 'elevation' piece is core and the early signs are promising, although we acknowledge it will be a few years before this pervades the entire offer."