Analysts at investment bank Citi have shared four possible reasons why British fashion business Frasers Group has bought into Australian footwear conglomerate Accent Group.
Last week, Brett Blundy’s BBRC International firm sold its shareholding stake in the Australian footwear conglomerate to the British retail company.
The sale covered a 14.65 per cent shareholding in Accent, valued at just over $160 million, and came as Blundy announced his exit from the Accent Group board of directors.
Accent Group manages key footwear brands and retailers in Australia, including The Athlete’s Foot, Skechers and Hoka.
According to Citi analysts in a note to investors, there are a range of opportunities for Frasers' buy into Accent, including the potential for the footwear business to run Sports Direct in Australia.
Sports Direct is a key subsidiary under Frasers, and already sells in Australia through a dedicated website. The retailer manages 472 retail locations across the United Kingdom.
The analysts noted that Frasers recently announced a joint venture with Asian-based sporting and lifestyle business MAP Active last year to run Sports Direct stores in Indonesia, with plans to expand operations in Malaysia.
MAP Active has over 850 sports and kids shops across Indonesia including Planet Sports, Sports Station, Golf House, Kidz.
Another key possibility is the potential for Accent to export its high margin vertical brands to Europe.
The footwear business manages over a dozen brands, either as owned brands or under licence, including the likes of Hoka, Skechers, Dr Martens, Merrell, and Henleys.
A third possibility is the potential to obtain improved supply and terms from major brands, as well as the sharing of retail intellectual property more generally.
The analysts also noted that it appears Brett Blundy would have done well from his shareholding in Accent under BBRC, having bought 11.82 per cent of 95 cps in November 2017 off the vendors of the original Accent business that sold to RCG in 2015.
The recent share buy from Frasers comes after Accent Group reported a 2.7 per cent lift in overall sales across the group to $1.6 billion.
Despite the lift, Accent’s earnings before interest and tax has dropped by 20.5 per cent to $110.4 million, while its net profit after tax fell 32.9 per cent to $59.5 million.
“In the context of a more challenging consumer environment, I am pleased with the performance of the Accent team,” Accent Group CEO Daniel Agostinelli said.
“Highlights for the year include the profit contribution of our newer banners including Nude Lucy, Stylerunner, HOKA and UGG along with continued strong performance in Skechers, The Athlete’s Foot (TAF), Hype DC and others.”