Retail giant Frasers Group lowers Hugo Boss stake

Frasers Group cut its stake in Hugo Boss to more than a third just two months after the announcement.

Mike Ashley’s retail empire said it now directly owns a 3.9 percent stake in the upscale fashion brand, down from 4.3 percent, while the additional stake has been reduced from 28.5 percent to a quarter through put options.

Put options are contracts that allow the owner to sell an asset at an agreed upon price, called the strike price, and are purchased with the belief that the value of the underlying security will fall.

In early November, the FTSE 100 company stated that its stake in Hugo Boss had increased to 34.3 per cent, giving it maximum exposure of around €1bn (£875m).

Shares of Hugo Boss have grown about 27 percent since that time, when it reported a record quarterly performance and sales recovery across all regions.

Given the premium Frasers will earn if its put and call options are exercised, the largest potential financial exposure to the company is now around £580 million.

The Derbyshire-based clothing retailer has gradually built up its ownership of the fashion house over the past two-and-a-half years, having first bought a 5 per cent stake in June 2020.

At the time of that initial investment, which took place during the first few months of the Covid-19 pandemic, it said the deal was motivated by a ‘belief in the long-term future of Hugo Boss.’

In fiscal year 2020, Hugo Boss’ total sales fell by almost a third to €1.95 billion, as fashion stores around the world had to temporarily close and the transition to remote working weakened demand for office wear.

The following year, however, sales recovered by 43 percent as lockdown restrictions eased and people worked from home less. The company has predicted that sales will increase by another 25 to 30 percent in fiscal year 2022.

Frasers Group’s interest in the German company has been accompanied by a flurry of acquisitions and investments in recent years as part of its “elevation without borders” strategy.

Three weeks ago it announced the £47.5 million purchase of stakes in 15 brands, including Pretty Green, founded by former Oasis singer Liam Gallagher, Rascal Clothing and Nicholas Deakins, from its old rival JD Sports.

The owner of Sports Direct regularly looks at companies that are on the verge of collapse or have gone out of business, such as women’s clothing retailer Missguided, online retailer Studio Retail and DW Sports Fitness.

It has also become the fourth-largest investor in ASOS, whose shares have fallen by about three-quarters over the past 12 months as the cost-of-living crisis has led shoppers to reduce their clothing orders.

Frasers Group Shares were 0.9 percent lower at £7.54 on Friday morning.