Sports Direct may still have a reputation for cluttered branches with surly staff and screaming banners, but it is also packed with shoppers. Its owner, Frasers Group, is now run by founder Mike Ashley’s son-in-law, Michael Murray, who has tried to make the retail empire sleeker.
Even Sports Direct now has some pricier, more fashionable brands thanks to fostering better relationships with big sporting names. The chain is flourishing, in spite of the cost of living crisis.
Now Sports Direct is going deeper into Europe. Frasers, a FTSE 100 company, last week took over Germany’s SportScheck chain, which owns 34 prime city stores. It is the latest salvo in Frasers’ ambition to become Europe’s biggest sports retailer, planting the flagship stores demanded by big trainer brands such as Adidas and Nike across the Continent, as well as in the Middle East and Africa.
It was notable that Adidas chief executive Bjorn Gulden swiftly endorsed Frasers’ acquisition in Germany, its home market. The German stores will now fall under Murray’s “Elevation” strategy, which involves digital investment and a spruce-up of older or newly purchased stores. It is an approach that is thought to have helped Frasers’ shares grow by 11 per cent since the start of the year.
However, trading at about £8, the stock is still some way off last summer’s £9.40 highs. At a price-to-earnings ratio of 9.9 for 2024, Frasers is also well off its historic levels of 16.
“The valuation looks cheap,” said Eleonora Dani, an analyst at investment firm Shore Capital, “considering the firm’s strengthening market position and its exposure to the luxury sector, as well as its significant diversification within the consumer space.”
By luxury, she means its chain of designer stores under the Flannels fascia.
More European shopping from Derbyshire-based Frasers is expected, and it has the strong balance sheet to absorb that: cash inflows exceeded £500 million at the full-year results this summer. It told the City to pencil in a 10 per cent rise in pre-tax profit to up to £550 million for 2024.
Admittedly, Frasers’ acquisitions have not always been successful, and its brands — including House of Fraser, Evans Cycles and Jack Wills, plus stakes in listed retailers AO World, Asos and Boohoo — look disparate.
But Frasers shopped cheaply (the retail shares were bought at prices a third cheaper than at the start of the year) .
The ride may be choppy, but Sports Direct should succeed where it expands. Buy Frasers.
