In recent times, Frasers Group (LSE:FRAS) has been acquiring shares in other businesses at an astonishing pace, leaving many wondering if Mike Ashley, the owner of 73% of the company, is attempting to transform it into a smaller version of Warren Buffett’s investment conglomerate, Berkshire Hathaway. While the two billionaires may come from different backgrounds, they share some striking similarities.
Both Mike Ashley and Warren Buffett displayed an entrepreneurial spirit from a young age. While still in school, Buffett sold Coca-Cola, chewing gum, and magazines door-to-door. Ashley, on the other hand, established a sports and ski store at the age of 18, which has since evolved into the Sports Direct empire.
Both of these tycoons have accumulated the majority of their wealth through a single company. For Buffett, it’s Berkshire Hathaway, a holding company with diverse subsidiaries engaged in various business activities. In Ashley’s case, it’s Frasers, a leisure and fashion retailer. Remarkably, both have also recently ventured into acquiring stakes in a range of other companies.
Here’s a glimpse of some of the companies that Frasers Group has invested in:
|Company||% Owned||Principal Activity|
|Mulberry Group||36.9||Handbags and leather goods|
|AO World||22.2||Online electrical retail|
|N Brown||19.4||Online ‘catalogue’ shopping|
|ASOS||19.1||Online fashion retail|
|boohoo||13.4||Online fashion retail|
|Hugo Boss||3.9||Upmarket fashion retail|
While some of these investments are described as strategic alliances and others as partnerships, they all represent opportunities for Frasers to generate profits.
Net Worth Disparity
There’s a substantial difference in the net worth of Warren Buffett and Mike Ashley. Buffett is estimated to be worth an astounding $120 billion (£99 billion), while Ashley’s fortune, as estimated by The Sunday Times, hovers just below £4 billion. However, considering Ashley’s youthfulness in comparison (34 years younger than Buffett), one can’t help but ponder the future potential of Frasers Group.
If Frasers were to experience growth akin to Berkshire Hathaway’s annual average of 19.8% from 1965 to 2022, it could potentially be valued at a staggering £1.7 trillion by 2057!
Assessing the Investments
But the critical question remains: can these investments deliver such monumental returns? The outlook appears mixed.
ASOS and boohoo, both of which Frasers has invested in, have faced challenges with declining sales. They are actively pursuing cost-cutting measures to boost their margins and maintain better control over their inventory levels. While ASOS is making progress on its path to recovery and returning to profitability, boohoo has a more arduous journey ahead.
Currys reported a 4% drop in like-for-like sales for the 17 weeks ending on 26 August 2023, compared to the same period in 2022. AO World, for the year ending 31 March 2023, recorded a 17% decline in revenue. However, it did manage to turn a profit before tax of £8 million (compared to a loss of £11 million in 2022).
Mulberry saw its revenue increase by 4% in 2023 compared to the previous year. Still, its earnings per share declined significantly from 32.2p to 19.1p. N Brown experienced a 10% drop in group revenue for the 13 weeks ending on 3 June 2023, compared to the previous year.
In contrast, Hugo Boss upgraded its earnings forecast for the current financial year on 2 August 2023. Frasers has reduced its stake in the company but retains a put option over 25% of the issued share capital.
Frasers Group’s core business, on the other hand, seems to be thriving. Its basic adjusted earnings per share increased by 17% to 70.9p for the 53 weeks ending on 30 April 2023, compared to 53.9p in 2022.
Mike Ashley’s Strategy
The big question is what Mike Ashley intends to do with these minority stakes. Speculation suggests he may be gearing up to launch takeover bids for these companies. However, it’s also possible that he might adopt the timeless approach favored by Warren Buffett, whose motto is to hold onto investments forever.
In conclusion, while the similarities between Mike Ashley and Warren Buffett are intriguing, the path they take with their respective companies and investments remains uncertain. Frasers Group’s rapid acquisition of stakes in various businesses indicates ambition, but whether it can replicate the success of Berkshire Hathaway is a question that only time will answer.
1. What is Frasers Group’s primary business? Frasers Group is primarily engaged in the leisure and fashion retail industry.
2. How much of Frasers Group does Mike Ashley own? Mike Ashley owns approximately 73% of Frasers Group.
3. What are some of the companies that Frasers Group has invested in? Frasers Group has invested in a diverse range of companies, including Mulberry Group, AO World, N Brown, ASOS, boohoo, Currys, and Hugo Boss.
4. What is the net worth of Warren Buffett and Mike Ashley? Warren Buffett is estimated to be worth around $120 billion (£99 billion), while Mike Ashley’s estimated fortune is just under £4 billion.
5. How has Frasers Group’s core business performed recently? Frasers Group’s core business has shown strength, with its basic adjusted earnings per share increasing by 17% to 70.9p for the 53 weeks ending on 30 April 2023.