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Luxury goods groups such as LVMH have long built empires by collecting high-end brands. On UK high streets and online, a small group of mid-market houses are gaining ever more dominance by different means.
Sports Direct-owner Frasers and Next have been scooping up mid-market brands such as Joules and Jack Wills in recent years. Brands that struggled as independent businesses as costs soared can survive as part of a wider group with extensive warehousing, distribution and ecommerce capabilities. Both Frasers and Next have also taken equity stakes in retailers such as Currys and Reiss, with which they see tie-up opportunities. Even Marks and Spencer now has a third-party retail strategy.
Frasers on Monday added to its brand empire by acquiring ecommerce group THG’s higher-end goods websites, including Coggles. The deal is part of a wider partnership that will allow Frasers to offer its “buy now, pay later” and loyalty platform — Frasers Plus — to THG’s customers.
This makes sense on several levels. Financial services only make up a fraction of Frasers’ revenues but it hopes other retailers will follow THG in adopting Frasers Plus. Finance accounted for 18 per cent of rival Next’s trading profits after funding costs in its last financial year, highlighting the potential that BNPL could have for Frasers even if it is a crowded market. Frasers will also benefit from THG’s logistics and distribution capabilities in markets such as Australia.
Frasers’ founder and majority shareholder Mike Ashley was well known for buying up slightly outmoded sports brands such as Everlast and Karrimor. His son-in-law Michael Murray, who took over as chief executive in 2022, has continued that tradition but enhanced the company’s management of brands, says Liberum’s Wayne Brown, citing its stewardship of the upmarket retailer Flannels in particular.
There have been some misses: Frasers put the online luxury retailer Matchesfashion into administration earlier this year barely three months after acquiring it. Its sometimes sporadic stakebuilding has also confused investors, particularly when it comes to challenged fast-fashion retailers such as Boohoo.
That is partly why Frasers, which trades on a forward price earnings multiple of 9 times, looks cheap compared with its peers. Next, the sector darling, trades on almost 15 times. Frasers has also been trying to address legacy governance concerns.
Other Frasers investments have done rather better: shares in electrical retailer Currys have gained more than 40 per cent since Frasers revealed its holding in June last year.
High-street consolidators have significantly outperformed the wider market in the past year. Expect their shopping to continue.
