Like Ashley-controlled retail conglomerate Frasers (FRAS) has become troubled online fashion seller ASOS’ (ASC) fourth biggest shareholder and increased its investment in German fashion brand Hugo Boss (BOSS:ETR).

These bold investments have been made despite further evidence of a downturn in the sector’s fortunes, with numerous retailers coughing up profit warnings and the latest Office for National Statistics (ONS) figures showing a bigger than expected dip in UK retail sales in September; high inflation weighed heavily on consumer spending power and contributed to a fall of 1.4% in both sales values and volumes.

Retail kingpin Ashley is clearly not done when it comes to his deal-making in the sector. The news Frasers has built a 5.1% stake in ASOS emerged days after the embattled online fast fashion firm’s new CEO José Calamonte outlined a recovery plan as ASOS lurched into the red for the year to August 2022.

Core tenets of the turnaround strategy include cost-cutting, enhancing the customer offer and stock management, as well as improving ASOS’ order economics, maintaining a robust balance sheet and refreshing the leadership team.

Frasers’ stake won’t give the Sports Direct-to-House of Fraser owner any control over the business or a position on the board, but Frasers is likely to use its stake to build a partnership with ASOS which could involve selling each others’ brands or sharing distribution.

It is worth noting Frasers’ expanding retail empire now includes ASOS’ fast fashion competitors Missguided and I Saw It First and the group also has stakes in N Brown (BWNG:AIM) and Mulberry (MUL:AIM) and is taking full control of Australian online retailer MySale (MYSL:AIM), so we’d expect the shrewd Ashley to eke out significant synergies.

And while the cost-of-living squeeze is constraining the spending power of ASOS’ core demographic and the company faces rising costs, Ashley clearly believes there is still value in the brand.

One worry for Frasers is the resilience hitherto exhibited by athleisure could be on the wane. A profit warning-driven sell-off (21 October) in shares of key Sports Direct supplier Adidas (ADS:FRA) spilled over into Frasers and sports retail rival JD Sports Fashion (JD.).

German trainers-to-sports apparel maker Adidas cut its full year revenue growth guidance to just mid-single digits, blaming ‘the deteriorating traffic trend’ in China as well as a ‘significant inventory build-up as a result of lower consumer demand in major Western markets since the beginning of September’.

Nevertheless, Ashley and son-in-law Michael Murray, recently handed the CEO baton at Frasers, have doubled down on their deal-making by increasing Frasers’ investment in Hugo Boss. The FTSE 100 retail giant now owns 4.3% of Hugo Boss shares directly and holds a further 28.5% through financial instruments known as put options, giving it a 32.8% interest in the apparel seller worth almost €1 billion without having to make a takeover bid.

‹ Previous2022-10-27Next ›