Frasers Group PLC (LSE:FRAS) might have failed with its MySale acquisition at this stage, but its corporate shopping spree shows no signs of slowing down.
The Australian online fashion marketplace knocked back a 2p per share, £13.6mln offer made last month after Frasers had built a 29% stake in the firm.
While unsuccessful on this occasion, it isn’t the first time Mike Ashley’s company has dipped into what is a buyers' market.
I Saw It First, Missguided and Studio Retail have been snapped up alongside an increased stake in Hugo Boss, but the attempted acquisition of MySale seems a rare setback
Cost of living, inflation and general uncertainty in the market would usually dictate that firms look to consolidate their balance sheets but Frasers announced bumper results in July and that means there is cash to spend at a time when many competitors are distressed.
Depressed market
Share prices across the retail sector have tanked over the course of the year as consumers cut back on spending across the board.
As a result, bigger firms like Frasers are building strategic positions, increasing their stakes in companies or outright buying them.
“Valuations across consumer-related sectors are pretty depressed, given the factoring in of a recessionary environment,” said John Stevenson, a retail analyst at Peel Hunt
“If you look across the sector, valuations are fundamentally attractive if you’re looking at it from a three to five-year view,” he added.
Julie Palmer, a partner at corporate restructuring firm Begbies Traynor (AIM:BEG) notes that “it’s a really good landscape to be opportunistic for a cash-positive business.”
Are there any signs it will slow down?
Given the current state of the play in the wider market in general, it makes sense for Frasers to continue to push ahead with even more acquisitions.
Joules next?
Interestingly, Palmer notes that Joules could potentially be Frasers’ next target, although this is just her opinion.
Next walked away from acquiring a stake in the clothing and homeware company and that may open the door for Frasers to swoop in.
It makes sense, the share price is down from highs of 300p three years ago to around 45p now and Palmer notes how Ashley is looking at ways to “knit bits of retail together so they can work much more symbiotically.”
Frasers’ attempted acquisition of MySale is a sign of exactly that, according to Palmer, with the Australian group specialising in getting rid of unwanted stock in the west, and selling it in markets in the East.
“Naturally, he (Ashley) will look across shores,” as he looks at ways of turning a process which is currently run by humans more automated with regards to returns.