Shore Capital reiterates 'buy' on Frasers after Matchesfashion purchase

On Wednesday, Mike Ashley's Frasers announced that it has bought loss-making luxury clothing site Matchesfashion from Apax Partners for around £52m in cash.

Matches offers more than 450 established and next-generation designers and generates the majority of its revenue internationally, with the business delivering to 150 countries outside the UK, Frasers said. The gross assets of the acquired companies were around £170m at the end of January 2023.

Frasers noted that the business has been loss-making in recent years and said the adjusted LBITDA for the year ended 31 January was a loss of £33.5m.

Shore Capital said the deal price is "highly affordable" for Frasers, as the acquisition "is modest in the big scheme of things, and has the basis to be complementary and synergistic".

However, Frasers' ongoing stake-building within other companies such as Boohoo and Asos – the latter of which it has become its biggest shareholder this year after a series of investments – "remains a more questionable exercise", Shore Capital said.

"All in all, we see Frasers being capable of sequential earnings growth set on a robust balance sheet with its distinctive nay maverick at times management at the wheel. So, we give it the benefit of the doubt on Matches... let's see if it strikes."