Frasers Group launches another share repurchase scheme

Frasers Group, which owns Sports Direct and Slazenger, has embarked on a share buyback plan of up to £80 million, the fifth it has announced in the past year.

Mike Ashley’s company said its final share purchase program would run until April 30 and that up to 10 million shares, equivalent to 2.2 percent of its outstanding share capital, could be withdrawn from circulation.

It means the retail giant, whose list of activities also includes Flannels, Jack Wills and House of Frasers, has announced buyback schemes worth up to £325 million since April 2022.

Companies often acquire their own stock to boost their share price and reward investors by giving them cash or increasing their ownership interest.

Buyback volumes plummeted during the height of the Covid-19 pandemic as companies tried to preserve cash, but skyrocketed after lockdown restrictions eased.

FTSE 100-listed groups launched a record £55.2 billion in share buybacks last year, according to online trading platform AJ Bell, about 40 percent of which came from oil and gas companies such as Shell and BP.

Many critics of buybacks argue that executives benefit far more than regular staff and that the money would be better spent investing in growth, raising employee salaries or making acquisitions.

However, Frasers Group has made an extensive list of acquisitions in recent years, most recently taking 14 premium fashion brands, including Pretty Green and Nicholas Deakins, from rival JD Sports.

That came shortly after the company revealed its half-year profit had jumped by more than half to £284.6m and forecast annual profits of £450m to £500m.

Frasers has also built stakes in luxury suit retailer Hugo Boss, JD Williams and Simply Be owner N Brown and troubled online retailer ASOS.

Sarah Riding, a retail partner at law firm Gowling WLG, said: ‘Mike Ashley’s focus on brand buying continues unabated and is largely successful in his approach to matching the right umbrella brand with the most appropriate acquisition when it comes to feel, style and, Essentially, demographics. .

However, with nothing guaranteed in the retail M&A space, Ashley is clearly committed to thinking laterally when it comes to risk, so he’s trying to protect himself against this further by increasing his ownership percentage.

“However, caution is advised as this route to bolstering stock prices has a clear ceiling that must be anticipated and compensated for if the approach is to be comprehensive.”

Frasers Group Shares closed trading 3.2 percent higher at 794p on Monday, making them the second-biggest gainer on the FTSE 100 behind Anglo American.

In the past two years, they have grown by just over two-thirds.

Michael Murray, Ashley’s successor as CEO, will be entitled to up to £100 million in equity awards if the company’s share price reaches £15 and remains there for 30 consecutive days sometime before October 2025.