• Sunday, July 14, 2024

Business

Frasers buys five per cent stake in fashion retailer Boohoo

(REUTERS/Dado Ruvic/File Photo)

By: easterneye.biz Staff

SPORTSWEAR group Frasers has bought a five per cent stake in fashion retailer Boohoo for £22 million, seeking “potential synergies” between the two businesses.

Frasers announced the deal on Tuesday (20), a day after it disclosed an 8.9 per cent stake in electricals retailer Currys.

In a filing to the London Stock Exchange, Frasers said Boohoo, which had its “laser focus on young female consumers”, was an “attractive proposition” for the group founded by Mike Ashley.

“We see potential synergies and an opportunity to strengthen our own brand proposition in collaboration with Boohoo,” Frasers, formerly known as Sports Direct, said.

It asserted that the group under CEO Michael Murray’s leadership would continue to “build on its track record of establishing supportive shareholder positions in attractive retail companies.”

Its acquisition of Boohoo’s stake comes as the Manchester-based group’s valuation has declined in the stock market after the pandemic time boom.

Boohoo’s market cap has eroded to less than one-tenth of its 2020 valuation, with its share prices declining to around 34p from over 400p nearly three years ago.

Online retailers’ profits in general have come under pressure in the face of the rising cost of handling deliveries and returned goods and renewed competition from high street stores after the end of lockdowns.

Boohoo, co-founded by the Indian-origin entrepreneur Mahmud Kamani, is driven by affordable fashion products with the group’s brands including Karen Millen and PrettyLittleThing.

Frasers said it had a “clear strategy to identify opportunities to invest in businesses which complement our existing sport, premium and luxury businesses, or help us to build and further utilise our sector-leading ecosystem.”

It forged a strategic partnership with AO World after buying a 21.3 per cent stake in the online electricals retailer last week.

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