Frasers Group plc (FRAS.L) | Investment Case

1. Company Snapshot

1.a. Company Description

Frasers Group plc, together with its subsidiaries, retails sports and leisure clothing, footwear, equipment, and apparel through department stores, shops, and online in the United Kingdom and internationally.The company operates through five segments: UK Sports Retail, Premium Lifestyle, European Retail, Rest of World Retail, and Wholesale & Licensing.It is also involved in the wholesale distribution and sale of sports and leisure clothing, footwear, equipment, and apparel; and licensing activities.

The company offers its products under its own and third party brands, which include Slazenger, Everlast, Lonsdale, Karrimor, 18montrose, Evans Cycles, Flannels, Frasers, Game, House of Fraser, Jack Wills, Sofa.com, Sports Direct, USC, Flannels, Cruise, van mildert, House of Fraser, Sofa.com, and Jack Wills.As of April 25, 2021, it operated 806 sports retail stores in the United Kingdom; 486 sports retail stores in Europe; 33 stores in Malaysia; 44 stores in the United States; and 179 Premium Lifestyle stores.The company was formerly known as Sports Direct International plc and changed its name to Frasers Group plc in December 2019.

Frasers Group plc was founded in 1982 and is headquartered in Shirebrook, the United Kingdom.Frasers Group plc operates as a subsidiary of MASH Holdings Limited.

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1.b. Last Insights on FRAS

Frasers Group's recent performance was negatively impacted by a decline in revenue, down 11% from FY 2024 to £4.93b, and a decrease in earnings per share to £0.66. The company's retail trading profit rose by 2%, but this was offset by a £50m budget hit. Additionally, Frasers Group's decision to step back from its bid for Revolution Beauty and its investment in We Do Play, a mini-golf and trampolining business, may have diverted resources away from core operations. Furthermore, the company's demand for Boohoo's founder, Mahmud Kamani, to be suspended over a supplier loan scandal has added to the negative sentiment.

1.c. Company Highlights

Last Price	678.5
Change Percentage	-3.62%
Open	726.5
Previous Close	704
Market Cap ( Millions)	2937
Volume	492215
Year High	775
Year Low	534
M A 50	721.66
M A 200	685.17

FCF Yield	16.05%
Dividend Yield	0.00%
ROE	14.49%
Debt / Equity	94.94%
Net Debt / EBIDTA	207.13%
Price To Book	1.5
Price Earnings Ratio	10.06
Price To FCF	6.23
Price To sales	0.6
EV / EBITDA	5.85

2. Transcript Summary

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3. NewsRoom

Sports Direct threatens shoppers with court action over missing parcels

Dec -02

Source:

Frasers Group to acquire Hervis’ Hungary, Romania operations

Nov -28

Source:

Mike Ashley denied vote on Boohoo boss’s £150m bonus

Nov -27

Source:

Frasers Group Selects Navan to Elevate Global Travel and Expense Management

Nov -24

Source:

Frasers Group Plc's (LON:FRAS) Recent Stock Performance Looks Decent- Can Strong Fundamentals Be the Reason?

Nov -12

Source:

Frasers Group buys majority stake in luxury retailer The Webster

Oct -10

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Frasers Group takes majority stake in US luxury retailer The Webster

Oct -10

Source:

The Webster Sells Majority Stake to U.K.’s Frasers Group

Oct -09

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.90%)

6. Segments

Retail - UK Sports Retail

Expected Growth: 2.5%

The UK sports retail market is mature, and growth is expected to be moderate. The segment's strong presence and adaptability will help it maintain market share, but overall growth will be constrained by market saturation. The global growth hypothesis is 2.9%, but this segment's growth is slightly lower due to market maturity.

International Retail

Expected Growth: 3.5%

International Retail is expected to outperform the global growth hypothesis, driven by expansion into new markets and increasing demand for sports apparel. The segment's diverse geographical presence and brand portfolio provide opportunities for growth, particularly in emerging markets. This justifies a higher growth rate than the global average.

Retail - Premium Lifestyle (Including Retail - House of Fraser)

Expected Growth: 2.0%

The premium lifestyle segment is expected to experience slower growth due to intense competition from online retailers and changing consumer behaviors. Although the segment has a loyal customer base, its growth will be constrained by these challenges. The global growth hypothesis is 2.9%, but this segment's growth is lower due to the competitive landscape.

Financial Services

Expected Growth: 2.9%

Financial Services is expected to grow in line with the global growth hypothesis. The segment's stable income stream and steady demand for financial products will support this growth rate. As the group's retail operations continue to evolve, Financial Services will adapt to changing customer needs, maintaining its growth trajectory.

Property

Expected Growth: 3.0%

The Property segment is expected to grow slightly above the global growth hypothesis. The segment's portfolio of high-quality assets and steady rental income will support this growth rate. As the group's retail operations continue to evolve, the Property segment will benefit from adapting to changing business needs, driving growth.

7. Detailed Products

Sports Direct

A leading sports retailer offering a wide range of sports equipment, footwear, and apparel from popular brands

Flannels

A luxury fashion retailer offering high-end clothing and accessories from designer brands

Evans Cycles

A leading cycling retailer offering a wide range of bicycles, accessories, and cycling gear

Game Digital

A leading video game retailer offering a wide range of console and PC games, gaming accessories, and digital downloads

Jack Wills

A British fashion brand offering high-quality clothing, accessories, and homeware

Sofology

A leading sofa and furniture retailer offering a wide range of stylish and comfortable sofas and furniture

Donnelly

A leading retailer of outdoor gear and equipment, offering a wide range of camping, hiking, and outdoor products

8. Frasers Group plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Frasers Group plc operates in a competitive market with many substitutes available, but the company's strong brand presence and customer loyalty mitigate the threat.

Bargaining Power Of Customers

Frasers Group plc has a large customer base, but individual customers do not have significant bargaining power due to the company's diversified product offerings and strong brand presence.

Bargaining Power Of Suppliers

Frasers Group plc has a moderate level of dependence on its suppliers, but the company's scale and negotiating power help to mitigate the bargaining power of suppliers.

Threat Of New Entrants

The retail industry has high barriers to entry, and Frasers Group plc's established brand presence and scale make it difficult for new entrants to gain significant market share.

Intensity Of Rivalry

The retail industry is highly competitive, and Frasers Group plc faces intense rivalry from established competitors, which puts pressure on prices and margins.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	34.95%
Debt Cost	6.45%
Equity Weight	65.05%
Equity Cost	13.06%
WACC	10.75%
Leverage	53.72%

11. Quality Control: Frasers Group plc passed 5 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Dunelm

A-Score: 5.7/10

Value: 4.8

Growth: 4.9

Quality: 6.4

Yield: 9.4

Momentum: 3.0

Volatility: 6.0

1-Year Total Return ->

Deliveroo

A-Score: 5.3/10

Value: 4.6

Growth: 8.1

Quality: 4.6

Yield: 0.0

Momentum: 7.5

Volatility: 6.7

1-Year Total Return ->

Frasers

A-Score: 4.8/10

Value: 7.4

Growth: 6.6

Quality: 4.9

Yield: 0.0

Momentum: 3.5

Volatility: 6.7

1-Year Total Return ->

Just Eat Takeaway

A-Score: 4.3/10

Value: 4.4

Growth: 5.7

Quality: 2.7

Yield: 0.0

Momentum: 9.0

Volatility: 4.0

1-Year Total Return ->

JD Sports Fashion

A-Score: 4.1/10

Value: 8.1

Growth: 7.0

Quality: 5.0

Yield: 0.6

Momentum: 2.0

Volatility: 2.0

1-Year Total Return ->

Zalando

A-Score: 3.7/10

Value: 5.2

Growth: 6.4

Quality: 4.8

Yield: 0.0

Momentum: 3.0

Volatility: 2.7

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

-4.50%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

10.75%

Frasers Group plc - GB00B1QH8P22

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on FRAS

1.c. Company Highlights

Higher Growth

Less Volatile

Lower Yield

Medium Volatility

Revenues Miss

Cheaper

Weak Momentum

Fairly Valued

Stable Momentum

Average Growth

Average Quality

2. Transcript Summary

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (2.90%)

6. Segments

Retail - UK Sports Retail

Expected Growth: 2.5%

International Retail

Expected Growth: 3.5%

Retail - Premium Lifestyle (Including Retail - House of Fraser)

Expected Growth: 2.0%

Financial Services

Expected Growth: 2.9%

Property

Expected Growth: 3.0%

7. Detailed Products

Sports Direct

Flannels

Evans Cycles

Game Digital

Jack Wills

Sofology

Donnelly

8. Frasers Group plc's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Frasers Group plc passed 5 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

6.78$

Current Price

6.79$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA