Frasers Group PLC (LSE:FRAS) should be relatively resilient in a consumer downturn given its exposure to low-priced sports retailing and due to the growth of its luxury format Flannels according to analysts at RBC Capital Markets.
The comments came after the broker recently hosted an investor call with Frasers' management. Its analysts also feel the group has an opportunity to become one of a handful of strong omnichannel players as the sector consolidates.
The group’s management felt the Flannels format should not see much impact from the consumer downturn given the demographics and wealth of its consumer base, while it also said Sports Direct offers “something for everyone.”
The analysts noted that the group's Evans chain was doing less well but said this reflected a trend in the cycling sector as a whole, while House of Fraser has had its problems but these are now largely under control.
Management also commented that brand relationships have significantly improved, particularly with Nike, the analysts added.
The RBC analysts kept a 'sector perform' rating on Frasers after the call with a 750p target price.
“Frasers has a strong position in UK mass market sports retailing and also has a long-term growth opportunity with its more upscale Flannels format in the UK and in omnichannel sports retailing in Europe ex UK,” they said.
But execution risk is higher than average for the group and it may be challenging to scale its luxury offer outside of regional UK cities, the analysts added.
Sports Direct should benefit from consumers becoming more price-conscious in a downturn, they concluded, however as a fairly low-margin value retailer, it is relatively exposed to potential cost and currency pressures on its business.